Residential energy expenditures have increased with colder weather and higher prices

Residential energy expenditures for homes heating with natural gas and propane for the current winter (November through March) have grown, and now we expect them to total 10% more than last winter. In our initial Winter Fuels Outlook forecasts published in October 2024, we had expected that homes mainly heating with natural gas would spend between 2% less or 7% more this winter than last, depending on weather conditions. As the winter has progressed and energy prices and consumption have increased beyond our initial expectations, we have revised these forecasts upward.

Each October, we publish a Winter Fuels Outlook with forecasts for energy consumption, prices, and expenditures for U.S. households. We categorize homes based on their main heating fuel: natural gas, electricity, propane, or heating oil. Almost all U.S. homes (96% in 2023) use one of those four fuels as their main heating source.

In each month from November through March, we update these forecasts based on actual weather and prices and the most recent Short-Term Energy Outlook forecasts for future weather and prices.

Weather outcomes are a key source of uncertainty in our forecasts, so we provide three sets with different weather assumptions. Retail energy prices—especially for propane and heating oil—are sensitive to actual weather and the resulting effects on energy demand, supply, and wholesale prices.

Residential propane and heating oil expenditures tend to have wider ranges of uncertainty in our forecasts. By comparison, natural gas and electricity prices tend to lag changes in wholesale prices because of the nature of utility regulation.

Last month’s cold weather increased energy prices and consumption, both of which increased residential energy expenditures. We use population-weighted heating degree days (HDDs) as an indicator of heating demand, with more HDDs indicating colder weather. A typical January in the United States has 831 HDDs, based on the average of the previous 10 Januarys. However, January 2025 was much colder, with 927 HDDs.

January’s cold weather increased natural gas consumption and resulted in near-record withdrawals of natural gas from storage. Similarly, U.S. propane inventories—which had been relatively full at the beginning of winter—were drawn down as consumption increased and are now near their previous five-year average. U.S. propane exports are also at record highs, which can also elevate domestic propane prices.

Wholesale natural gas and propane prices increased in late 2024 and continued to increase in January. In our October 2024 forecast, we had expected wholesale natural gas and propane prices to increase during the winter, but the timing and magnitude of actual price increases were faster and greater than initially forecast.