EIA Expects Higher Heating Costs this Winter

October 8, 2008

The average heating bills for U.S. households will be 15% higher this winter compared to last winter, according to the latest projections from DOE's Energy Information Administration (EIA). The EIA's "Short-Term Energy and Winter Fuels Outlook," released on October 7, expects higher fuel costs to cause most of the increase, although colder weather will also contribute to the increase in many areas. As has been the recent trend, those using heating oil will suffer most, with a 23% increase this winter, helped in part by an expected colder winter in the Northeast. Those using natural gas for heating will experience an 18% increase in heating costs, while those using propane and electricity will face the smallest impacts, with increases of 11% and 10%, respectively. However, national averages hide some regional impacts, as a colder winter and rising power prices in the South are expected to cause a 16% cost increase for those using propane and a 59% cost increase for those using electricity.

The report is also the first to note the ongoing impacts of Hurricanes Gustav and Ike on energy supplies in the United States. The EIA expects energy production in the Gulf of Mexico to continue recovery efforts at least through October, and as a result, the agency predicts a 2% drop in U.S. crude oil production for the year as a whole, compared to 2007. U.S. oil production will fall below 5 million barrels per day for the first time since 1946, while gasoline inventories are now at 180 million barrels, their lowest level since August 1967. In addition, natural gas production from federal waters in the Gulf of Mexico is projected to decline by 9.1% for 2008, compared to last year. As of October 7, the Minerals Management Service (MMS) estimates that 44.8% of oil production in the Gulf remains shut-in, along with 38.7% of the natural gas production. See the EIA's "Short-Term Energy and Winter Fuels Outlook" and the latest status report from the MMS.