U.S. consumers will spend more to heat their homes this winter than last year due to surging energy prices, the U.S. Energy Information Administration (EIA) projected in its winter outlook on Wednesday.
Energy prices have risen sharply worldwide, causing power crunches in large economies like China and India. The United States has so far not seen that same effect, even though the prices of fuels ranging from natural gas to heating oil and propane has risen notably and will hit household finances as the weather turns colder.
“The main reason wholesale prices of natural gas, crude oil, and petroleum products have risen is that fuel demand has increased from recent lows faster than supply, in part, because of economic recovery after the first year of the COVID-19 pandemic,” the EIA said.
Nearly half of U.S. households rely on natural gas for heat, with the average cost for those homes expected to rise by 30% from the year-earlier period, the statistical arm of the U.S. Department of Energy said.
Average winter costs for homes with natural gas last winter were $572 per household, far cheaper than other major sources of heat.
The most dramatic increases will be seen for households that rely on propane or heating oil, the EIA said, because changes in those prices at the wholesale level pass through much more quickly to consumers. Those costs are expected to rise by 54% and 43%, respectively, the EIA said, from last winter.
As of the 2019-2020 heating season, however, less than 12 million American households relied on those fuels – about 9% of total U.S. households, according to the EIA.
Last year, many energy prices plunged to multi-year lows due to coronavirus demand destruction – particularly natural gas, the most popular heating fuel in the United States, which hit a 25-year-low.
Depending where people live, the EIA said residential costs, which are higher than wholesale prices, will rise to about $11-$14 per thousand cubic feet (mcf) for natural gas, about $2.50-$3.50 per gallon for propane, and almost $3.50 per gallon for heating oil.
That compares with last winter’s residential costs of around $10-12 per mcf for natural gas, $1.50-$2.50 per gallon for propane, and $2.50 per gallon for heating oil.
The EIA will provide more details when it releases its Short-Term Energy Outlook later Wednesday. (Reporting by Scott DiSavino; Editing by Andrew Heavens, Jonathan Oatis and Marguerita Choy)