Warm weather, low energy prices reduce US home-heating expenses

January 18, 2016 By    

propane-temperatures-outlookWarmer temperatures and lower energy prices contributed to a reduction in the U.S. Energy Information Administration’s (EIA) current average heating expenses forecast for the 2015-16 winter compared with that in its October 2015 Winter Fuels Outlook.

EIA produces a Winter Fuels Outlook each October that projects heating fuel expenses for the coming winter season based on forecasted fuel prices and the National Oceanic and Atmospheric Administration’s forecasted temperatures measured by heating degree days.

Based on the Winter Fuels Outlook, the 2015-16 winter was expected to have lower expenses than the 2014-15 winter. Since the outlook was released, the weather has been much warmer than anticipated, and prices have fallen faster than expected, resulting in even lower heating expenses. At the national level, the 2015-16 winter is predicted to be 15 percent warmer than last winter.

According to EIA, forecast expenses for propane are lower than those in its Winter Fuels Outlook. In EIA’s January Short-Term Energy Outlook, 2015-16 winter expenses for households that primarily heat with propane are expected to be 24 percent lower than last winter in the Northeast and 31 percent lower in the Midwest. In the Winter Fuels Outlook, savings were only expected to be 15 percent and 21 percent in the Northeast and Midwest, respectively.

EIA’s forecast expenses for other fuels and energy sectors are also generally lower than previously anticipated in the Winter Fuels Outlook.

In the January Short-Term Energy Outlook, EIA forecast the retail price of natural gas would be 6 percent less this winter than last winter, following an October Winter Fuels Outlook forecast of 4 percent lower retail prices than last winter. Based on more recent pricing data and weather forecasts, EIA expects the average household that heats primarily with natural gas will spend about 17 percent less on that fuel this winter compared with last year.

Prices for petroleum-based fuel have also been lower than expected due to falling crude oil prices. In the Winter Fuels Outlook, retail prices were expected to be 15 percent lower than last winter, but they are now expected to be 29 percent lower than last winter. The average household that primarily heats with heating oil is expected to spend about 41 percent less on the fuel this winter compared with last year.

Because electricity prices change much more slowly than other heating fuels, changes in expenses over the course of a winter tend to be the result of temperature changes. For customers heating with electricity in the Northeast, Midwest and South, where temperatures have been warmer than anticipated, winter heating expenses are forecast to be 9 percent lower than last year compared with 5 percent lower that was reported in the Winter Fuels Outlook. However, in the West, expenses this winter are expected to be 9 percent higher than last year, up from the 4 percent expected increase in the Winter Fuels Outlook.

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