Natural gas bills for residential households this winter couldbe as much as 40% higher than last heating season, with the Midwestlikely to feel the pinch the most, according to a market overviewpresented by the Energy Information Administration (EIA) last week.
The 40% hike in household bills is a distinct possibility ifresidential gas prices rise 25% this winter, as is expected, andweather conditions are normal, the Department of Energy (DOE)agency said in its “Winter Fuels Market Assessment 2000” last weekto the Northeast-Midwest Congressional Coalition. However, if thewinter is colder, then the increase in residential bills will beeven greater, it noted.
The probability that the winter heating season of 2000-2001 willbe “at least somewhat colder” than last winter is 95%, that it willbe “10% (or more) colder” than last winter is above 50%, or that itwill be “20% (or more) colder” than last winter is about 10%,according to the EIA.
Even with normal temperatures, there would be “broad increases”in heating demand across the North Central and Northeast regions,the agency noted, but the greatest potential for heating demandgrowth will be in the Midwest. Since the Midwest typically favorsnatural gas as a home heating fuel, this would mean that demand forgas and propane would likely “exhibit higher year-over-year growthrates than heating oil” this winter, the EIA said.
In the Midwest, the EIA forecasts that residential customerscould see average gas prices as high as $8.40/Mcf this winter, upfrom $6.61/Mcf a year ago. This would mean that the average wintergas bill for a Midwest household would total $734 this year,compared to $511 for last winter, the DOE agency noted.
Even though gas inventories are below their historical levels,the EIA seems to think there will be enough gas in storage to meetdemand this summer. “We are currently projecting that working gaswill be between 2,800 and 2,900 Bcf at the end of October, enteringthe heating season somewhat below average,” it said. But if youallow for at least 800 Bcf to be in storage at the end of theheating season in March 2001, “this suggests an operational abilityto withdraw 2,000 Bcf or more during the [upcoming] heating season,which exceeds the 1,876 Bcf withdrawn last winter.”
As for the heating oil market, the EIA projects that Northeastresidential customers will be paying higher prices this winter.”Even without particularly sharp cold weather events this winter,we think consumers are likely to see higher average heating oilprices than were seen last winter,” the agency said.
It forecasts that heating oil in the Northeast will be$1.32/gal., up from $1.19/gal. last winter, assuming normalweather. Overall, the EIA estimates that the average Northeasthousehold will pay $901 for heating oil supplies this winter,compared to $765 a year ago.
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