EIA forecasts higher US heating bills this winter

The U.S. Energy Information Administration (EIA) expects that U.S. households will spend more money on heating costs this winter and consume more energy to keep homes warm. In its Winter Fuels Outlook, EIA forecasts an increase in average heating prices this winter for all regions of the United States and all heating fuels under a wide variety of weather conditions.

Compared with last winter’s heating costs, EIA forecasts U.S. households will spend 54% more for propane, 43% more for heating oil, 30% more for natural gas, and 6% more for electric heating. U.S. households will spend even more if the weather is colder than expected.

“As we have moved beyond what we expect to be the deepest part of the pandemic-related economic downturn, growth in energy demand has generally outpaced growth in supply,” said EIA Acting Administrator Steve Nalley. “These dynamics are raising energy prices around the world.”

In addition to higher fuel costs, the National Oceanic and Atmospheric Administration expects a slightly colder winter this year than last year. EIA expects those colder temperatures to increase U.S. energy consumption for heating this winter.

“The higher global and domestic energy prices that are resulting from economies beginning to grow again are going to translate into larger household bills for energy this winter,” Nalley said.

The Winter Fuels Outlook is a supplement to EIA’s Short-Term Energy Outlook (STEO). Other highlights from this month’s STEO include:

• EIA revised its Henry Hub natural gas spot price forecasts to average $5.80 per million British thermal units in the fourth quarter of 2021, 45% higher than last month’s estimate. “Increased natural gas demand in Europe and Asia is supporting record U.S. LNG exports to those regions,” Nalley said. “Low natural gas inventories in the United States and Europe make our price forecasts very uncertain, because a severe cold snap could lead to significant price effects.”
• Brent crude oil prices averaged more than $80 per barrel (b) so far in October, a nearly seven-year high, as Hurricane Ida reduced U.S. oil production and OPEC+ announced it would stick to its plan of increasing crude oil production by 400,000 barrels per day in November. EIA estimates that Brent crude oil will average $81/b for the remainder of 2021, $10 higher than its previous estimate. “We expect U.S. crude oil production to ramp up in 2022 as tight oil production rises, which should help moderate prices from this level next year,” Nalley said.