Winter forecast for heating homes: costly

It appears that Americans will be walloped by energy sticker shock right through this winter.

With the price of both oil and natural gas significantly higher than last year, the cost of heating a home will take yet more money out of wallets. Early estimates are that it will cost at least 30 percent more than last year for homeowners in the Midwest who use natural gas to heat their homes, and as much as 20 percent higher for those in the Northeast using heating oil. Those are conservative estimates, however, and expenses could be higher, depending on the weather.

"It's going to cost more for people to keep warm this winter," says Rick Mueller, senior energy analyst at Energy Security Analysis Inc. in Wakefield, Mass.

Last December, crude oil was about $40 a barrel. By February, it had risen into the low $50 range. Monday morning, crude oil was more than $65 a barrel.

As for natural gas, last August wholesale prices were $5.41 per thousand cubic feet. Today, they are about $9.

The higher cost of natural gas is partially the result of the sizzling summer. The nation's utilities often use natural gas to power the units they turn on to meet peak demand.

"With gas going to meet cooling demand, there was a slowdown in recent weeks in filling the gas storage for the winter," says Dave Costello, an energy analyst at the Energy Information Administration in Washington.

Storage is important because daily production meets only about 60 percent of the nation's winter requirements for natural gas.

Despite the slow fill rate this summer, inventories are still about 6 percent higher than the five-year average, according to Chris McGill, managing director of policy analysis at the American Gas Association in Washington. In fact, he anticipates that even if the winter is cold, the industry will meet demand. "It's still a tight market, but there is enough gas to meet the highest type of demand," he says.

The petroleum industry is also running late in producing fuel oil. The reason: high gasoline demand. "Gasoline inventories have fallen so sharply it could impact distillate [heating oil] production," says Mr. Mueller.

For people in the Northeast who heat with fuel oil, the average total cost will go from $1,225 last winter to $1,541 this winter, estimates Mark Wolfe, executive director of the National Energy Assistance Directors' Association in Washington. Although it's harder to estimate natural-gas prices, Mr. Wolfe estimates the average bill will increase from $935 to $1,262.

Consumers searching for their winter heating supplies are already noticing the difference. Last year, Ken Simmons of Riegelsville, Pa., had signed up early to buy his fuel oil at $1.39 a gallon. That contract expires at the end of this month, and his supplier has offered him a new one at $2.29 a gallon.

"I think I'm going to wait and see what happens to the price after Labor Day," says Mr. Simmons. "I've read that gasoline prices are up because of summer vacations. Maybe after Labor Day oil prices will fall."

For low-income individuals, the prospect of higher heating prices is daunting. "Combined with the price of gasoline, low-income people are getting battered," says Jim Nolan, director of the Montana's energy assistance program in Helena.

One of those is Annette Hayden, a resident of Lewistown, Mont. Ms. Hayden, a working single mother with two young boys, is already behind on her utility bill from the summer. "I owe Northwestern Energy $135, and I am paying them $50 to $75 now," she says. "I just can't pay in full."

Like many low-income wage earners, Hayden uses the federal earned-income tax credit to pay off her bills. She also receives help from the federal Low Income Home Energy Assistance Program (LIHEAP). But two years ago, she got so far behind that the utility threatened to turn off her electricity. "I went to a local church to get $300," she says.

The prospect of more expensive heating this winter "is unfathomable," says Hayden, a reporter on the local paper, the Lewistown News-Argus.

In fact, Mr. Nolan worries that higher energy prices might cause more people in Hayden's situation to apply for federal assistance. "If 30,000 or 40,000 apply, our benefits will be negligible," he says. Last year in Montana, 22,000 applied for federal assistance, but 90,000 are potentially eligible.

At this point, it's not certain what benefits Congress will enact for fiscal year 2006. A House committee has earmarked about $180 million less than last year. The Senate has funded it at the same level as last year. "Congress's legislation does not take into account this year's price increases," says Wolfe. "So far, legislators have sympathy but no money."