RL34714
Winter Fuels Markets
October 21, 2008
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Summary
The Energy Information Administration in its Short-Term Energy and Winter Fuels Outlook (STEWFO) for the 2008-2009 winter heating season warned consumers of the likelihood of higher heating costs. Average expenditures for those heating with natural gas might see their expenditures rise by more than 18%. Home heating oil expenditures were forecast to rise by 23%, propane expenditures by 11% and electric heating expenses by 10%. The forecasted increases in total expenditures result from higher prices for all energy sources, as well as the expectation of a colder winter than the past several years. Oil markets have experienced downward volatility recently, with the price of crude oil falling almost 50% compared to the peak price reached in June 2008. If the downward trend in oil prices continues through the winter 2008-2009 heating season, or stabilizes at a lower level, the increased expenditure estimates of the STEWFO might not materialize. This is because the price of oil is a major factor in all the home heating prices surveyed in the STEWFO. The price of oil directly affects the prices of heating oil and propane, which are petroleum products. The price of oil indirectly affects the price of natural gas, and also, therefore, electricity through a historical price parity relationship. The key risk factors for the STEWFO estimates are likely to be the extent to which the U.S. economy continues to experience an economic slowdown that results in further declines in the price of crude oil. Additionally, the variability of the weather could affect the expenditure estimates. The Low Income Energy Assistance Program (LIHEAP), the primary federal program to assist with home heating costs, has been funded at higher levels than last year, and its eligibility requirements have been expanded. As a result, this program appears to be able to provide aid to consumers should heating costs escalate. This report will be updated.
