The U.S. Energy Information Administration has released its annual Short-Term Energy and Winter Fuels Outlook.

Highlights

  • EIA projects average U.S. household expenditures for natural gas and propane will increase by 13% and 9%, respectively, this winter heating season (October 1 through March 31) compared with last winter. Projected U.S. household expenditures are 2% higher for electricity and 2% lower for heating oil this winter. Although EIA expects average expenditures for households that heat with natural gas will be significantly higher than last winter, they are still lower than the previous 5-year average (see EIA Short-Term Energy and Winter Fuels Outlook slideshow).
  • Brent crude oil spot prices fell from a recent peak of $117 per barrel in early September to $108 per barrel at the end of the month as some crude oil production restarted in Libya and concerns over the conflict in Syria moderated. EIA expects the Brent crude oil price to continue to weaken, averaging $107 per barrel during the fourth quarter of 2013 and $102 per barrel in 2014. Projected West Texas Intermediate (WTI) crude oil prices average $101 per barrel during the fourth quarter of 2013 and $96 per barrel during 2014.
  • The weekly U.S. average regular gasoline retail price fell by 18 cents per gallon during September, ending the month at $3.43 per gallon. EIA’s forecast for the regular gasoline retail price averages $3.34 per gallon in the fourth quarter of 2013. The annual average regular gasoline retail price, which was $3.63 per gallon in 2012, is expected to be $3.52 per gallon in 2013 and $3.40 per gallon in 2014.
  • Natural gas working inventories ended September at an estimated 3.52 trillion cubic feet (Tcf), 0.17 Tcf below the level at the same time a year ago and 0.04 Tcf above the previous five-year average (2008–12). EIA expects that the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.71 per MMBtu in 2013 and $4.00 per MMBtu in 2014.
  • Despite a rise in natural gas prices from their 2012 level, stable coal prices and an increase in electricity generation from coal contribute to only modest increases in retail electricity prices. EIA expects residential electricity prices to increase by 2% in 2013 and 1% in 2014.

Outlined below is more detailed analysis:

Projected Winter Fuel Expenditures by Fuel and Region

The average household winter heating fuel expenditures discussed in this STEO provide a broad guide to changes compared with last winter. However, fuel expenditures for individual households are highly dependent on local weather conditions, market size, the size and energy efficiency of individual homes and their heating equipment, and thermostat settings (see Winter Fuels Outlook table). Forecast temperatures are close to last winter nationally, with the Northeast about 3% colder and the West 3% warmer.

Natural Gas

About one-half of U.S. households use natural gas as their primary heating fuel. EIA expects households heating with natural gas to spend an average of $80 (13%) more this winter than last winter. The increase in natural gas expenditures represents a 14% increase in the average U.S. residential price from last winter, with consumption that is slightly lower than last winter nationally. The projected changes in residential natural gas prices this winter range from a 10% increase in the West to a 15% increase in the Northeast. Several factors contribute to this regional variation, including differences in weather patterns, regional changes in production and pipeline capacity, and differences in regulatory constraints in passing price changes through to customers.

Heating Oil

EIA expects households heating primarily with heating oil to spend an average of about $46 (2%) less this winter than last winter, reflecting a 5% decrease in prices and a 3% increase in consumption. Although winter temperatures are expected to be similar to last winter nationally, weather in the Northeast is expected to be 3% colder than last winter. Reliance on heating oil is highest in the Northeast, where about 25% of households depend on heating oil for space heating, compared with 6% of households nationally. The state of New York, which accounts for about one-third of the region’s heating oil market, has required the use of ultra-low sulfur heating oil since July 2012. A number of other states will begin to move away from higher-sulfur heating oil in the coming years.

Propane

About 5% of all U.S. households heat with propane. EIA expects households heating primarily with propane to spend more this winter, but the projected increase varies across regions. EIA expects that households heating with propane in the Midwest will spend an average of $120 (9%) more this winter than last winter, reflecting prices that are about 10% higher and consumption that is 1% lower than last winter. Households in the Northeast are expected to spend an average of $206 (11%) more this winter with average prices that are about 8% higher and consumption that is 3% higher than last year.

Electricity

Households heating primarily with electricity can expect to spend an average of $18 (2%) more this winter with 2% higher prices but consumption slightly lower than last winter. About 39% of all U.S. households rely on electricity as their primary heating source, ranging from 14% in the Northeast to 63% in the South.

Wood

The use of cord wood and wood pellets as the primary residential space heating fuel has increased by 39% since 2004, to about 2.5 million households in 2012. About 8% of households use wood as a secondary source of heat, making wood second only to electricity as a supplemental heating fuel. About 20% of New England homes (1.1 million) used wood for space heating, water heating, or cooking in 2009 (EIA, Residential Energy Consumption Survey, 2009), which is nearly twice the national rate. Almost half of all rural households in New England used wood compared with only 12% of the area’s urban households that used the fuel.