NGI The Weekly Gas Market Report
Natural gas bills for residential households this winter couldbe as much as 40% higher than the last winter heating season, withthe Midwest likely to feel the pinch the most, according to amarket overview presented by the Energy Information Administration(EIA) recently.
The 40% hike in household bills is a distinct possibility ifresidential gas prices rise 25% or more this winter, as isexpected, and winter weather conditions are normal, the Departmentof Energy (DOE) agency said in its “Winter Fuels Market Assessment2000” to the Northeast-Midwest Congressional Coalition. However, ifthe winter is colder, then the increase in residential bills willbe far 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.
With normal temperatures, there would be “broad increases” inheating demand across the North Central and Northeast regions, theagency noted, but the greatest potential for heating demand growthwill be in the Midwest. Since the Midwest typically favors naturalgas as a home heating fuel, this would mean that demand for gas andpropane would likely “exhibit higher year-over-year growth ratesthan heating oil” this winter, the EIA said.
In the Midwest, the EIA forecasts that residential customerscould see average burner-tip prices as high as $8.40/Mcf thiswinter, up from $6.61/Mcf a year ago. This would mean that theaverage winter gas bill for a Midwest household would total $734this 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 winter. “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an operational abilityto withdraw 2,000 Bcf or more during the [upcoming] heating season,which exceeds the 1,876 Bcf withdrawn last winter.”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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