EIA: Propane households likely to spend less on energy this winter

November 14, 2023 By    

The U.S. Energy Information Administration (EIA) expects winter heating expenditures for U.S. households to remain relatively flat or decrease this season, depending on the main heating fuel households use and the region in which they are located.

Household propane spend

Spending by homes heating primarily with propane will average $1,340, a slight decrease compared to the previous winter based on high inventory levels that will keep prices down and fewer heating degree-days (HDD) nationwide.

However, expenditures will vary significantly based on region and actual weather outcomes, according to EIA.

EIA assumes temperatures in the East will be slightly colder than last winter but warmer than the average of the previous 10 winters. In the West, temperatures will be warmer than last winter and warmer than the average of the previous 10 winters. If the winter is 10 percent colder, measured in HDDs, EIA predicts significant upward pressure on wholesale propane prices that would be passed along to the consumer.

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Regional propane spend

EIA forecasts households heating with propane in the Northeast will spend on average $1,700 per household, slightly higher than last winter, based on an expectation of 5 percent lower propane prices and 6 percent more household propane consumption in the region.

The Midwest is predicted to spend about $1,300, 11 percent less than last winter, reflecting a forecast for a 13 percent drop in propane prices and slightly higher propane consumption.

In the South, EIA expects households to spend about $1,180, 6 percent more than last winter, reflecting a 9 percent increase in consumption and a 3 percent decline in propane prices.

EIA does not forecast household propane expenditures in the West.

In the colder case, EIA forecasts household expenditures for propane to be more than 20 percent higher than last winter in the Northeast and about 40 percent higher in the Midwest and South. In the warmer case, with 10 percent fewer HDDs, EIA’s forecast average U.S. expenditures will be down 13 percent compared with the winter of 2022-23.

U.S. average household propane spend in three cases (Source: U.S. Energy Information Administration, Winter Fuels Outlook)

Prices, consumption, inventory

The propane spot price at Mont Belvieu, Texas, was 73 cents per gallon in September, 8 percent less than the price in March at the end of the 2022-23 winter heating season. EIA forecasts the Mont Belvieu spot price will average over 75 cents per gallon throughout the winter, 5 percent lower than the previous winter.

While propane consumption in EIA’s forecast increases compared with last winter, it remains slightly lower than the 2017-22 winter average. Propane consumption last winter was the lowest in more than a decade.

EIA expects minimal demand for propane for commercial grain drying. The current harvest is ahead of schedule compared with the five-year average, with increasingly poor crop conditions, which means farmers have a longer period of time to dry crops in the field.

Propane inventories will remain well above their previous five-year average this heating season, according to EIA. At the end of September, inventories totaled 98 million barrels, 11 million above the five-year average. In the Midwest, where most of the U.S. households that heat with propane and most of the demand for grain drying are located, inventories are 26 million barrels, or 1 million barrel higher than the five-year average.

Other fuels

EIA forecasts lower natural gas expenditures due to high inventories and lower prices. For homes that primarily heat with electricity, EIA expects expenditures in line with last winter. Electricity has the widest range of uses among the fuels, so the combined electricity consumption EIA uses to determine expenditures is less sensitive to changes in temperature. Expenditures for homes heating with heating oil are higher than last year in EIA’s forecast unless temperatures are warmer than expected.

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