EIA anticipates higher heating costs this winter

Homeowners' heating costs will likely be higher this year than in the previous two winters, according to an analysis by the U.S. Energy Information Administration.

The EIA, which analyzes data related to energy issues, predicts that heating costs will be 8 to 17 percent higher than last year on average. It says this increase is due to a forecast from the National Oceanic and Atmospheric Administration predicting a colder winter, along with higher fuel prices to a lesser extent.

The EIA cautions that home heating costs will vary based on the size of the home, indoor temperature preferences, and other factors. It also says there can be a good deal of uncertainty in weather patterns, so forecasts are drafted for winters that are 10 percent warmer than the NOAA prediction and 10 percent colder. In the past decade, the winter has been warmer than expected in three seasons (2011-2012, 2015-2016, and 2016-2017) and colder than expected in one season (2013-2014).

In its Winter Fuels Outlook report, the EIA says nearly half of all homes in the United States use natural gas for heating. The average homeowner using this method is expected to spend $644 to heat their home between October and March, a 12 percent increase from the previous year. This takes into account an anticipated 9 percent increase in fuel consumption due to colder temperatures and a 2 percent increase in natural gas prices.

If the winter is 10 percent colder than expected, the EIA expects natural gas heating costs to be 20 percent higher than the previous winter. Temperatures would still be colder than last winter even if they are 10 percent warmer than the NOAA forecast; as such, the EIA forecasts that natural gas heating costs would still be 3 percent higher than the previous year.

Heating oil is forecast to cost the average homeowner $1,462 more than the previous winter. This would be a 17 percent increase from last winter, driven by an anticipated 6 percent increase in consumption and 10 percent increase in fuel prices. However, EIA notes that this would still be about 15 percent below the average costs in the previous five winters.

Heating oil is most commonly used in the Northeast, where 21 percent of homes use this type of fuel. This is just over four times the national share, but down from 25 percent five years ago as more homes switch to natural gas or electricity.

The EIA expects that heating oil costs will jump 32 percent if the winter is 10 percent colder than expected. If it is 10 percent warmer than the NOAA forecast, it predicts that fuel consumption would be below the previous winter but that costs would still be 5 percent higher due to increased fuel prices.

While propane is most commonly used in the Midwest, it is also a popular heating method in the Northeast. The EIA forecasts that the average homeowner with propane heat will pay $1,661 during the winter, but that expenditures will vary by region.

In the Northeast, propane heat is expected to have costs 11 percent higher—$221—than last winter due to a 5 percent increase in consumption and 6 percent increase in prices. The average expected increase would be $503 in a colder than expected winter, although Northeast homeowners with propane heat are forecast to save $137 over the previous winter if temperatures are 10 percent warmer than the NOAA forecast.

Propane casts are expected to be up by 21 percent, or $249, in the Midwest due to a 12 percent increase in fuel consumption and 8 percent increase in prices. Midwestern homeowners with propane heat are forecast to pay $592 more than the previous year if the winter is colder than expected and $68 more if temperatures are warmer than expected.

Electricity, the heating method used by about two-thirds of homes in the South, is anticipated to cost the average homeowner $980 this winter. This would be an 8 percent increase from the previous year, resulting from a 6 percent increase in consumption and 2 percent increase in electricity costs.

Under the colder than expected scenario, the EIA says that higher costs would not be felt immediately but would rather cause retail electricity rates to be about 6 percent higher in 2018 – a growth rate 2 percentage points above normal. A warmer than expected winter would result in an anticipated 4 percent increase in heating costs.

The EIA also notes that about 2 percent of U.S. homes use cord wood or wood pellets as their primary source of heat, while another 8 percent have it as a secondary heating source. This information was derived from the U.S. Census Bureau's American Community Survey in 2015, which also determined that one in five New England homes use wood as a primary or secondary source of heat.

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