Heating costs expected to rise

WASHINGTON – Expected colder weather, higher oil prices and a stronger economy could force residential customers to pay $100 to $300 more to heat their homes this winter than during the unusually mild winter of a year ago, the Energy Department forecasts.

With fuel prices increasing and demand probably greater than last winter, the cost of keeping warm this year is expected to increase 19 percent to 45 percent depending on the type of fuel, said the Energy Information Administration.

The report also noted that last winter was unusually mild, and this winter’s heating costs still are expected to be below those of two years ago when winter temperatures were more normal.

The EIA analysis did not attempt to take into account the possibility of supply disruptions if war should break out against Iraq.

Even without a war, “our expectation is that [tight] crude oil inventory will keep upward pressure on prices,” Guy Caruso, the EIA administrator, told reporters. He predicted that oil prices could hover around $30 a barrel into the first quarter of 2003.

The price of a barrel of benchmark West Texas Crude was $29.63 Monday on the New York Mercantile Exchange. It has reached $30 a barrel several times in recent months, forced there by anticipation of fighting in Iraq.

The EIA assumed in its analysis a return to normal winter weather after an unusually warm winter last year depressed demand and prices. The EIA projects an average price of heating oil 25 cents higher this winter, or about $1.35 a gallon. That’s about what it cost during the 2000-2001 winter.

The agency said heating oil inventories had slipped to the lower range of normal seasonal levels, raising the possibility of “strong upward price risk near midwinter if weather turns colder than normal.” On the other hand, warmer than normal weather could significantly reduce the heating costs, said the agency.

The forecast comes as Maine’s funding from the Low Income Home Energy Assistance Program, which helped roughly 46,000 Maine families last year, faces possible cuts.

President Bush has requested an 18 percent cut in the program nationally, reducing funding from $1.7 billion to $1.4 billion. Maine would see a loss of $4.1 million, from $22.7 million down to $18.6 million.

If not cut, Maine’s LIHEAP budget would serve 47,000 households this year, allotting roughly $350 in benefits per household, said Jo-Ann Choate, LIHEAP coordinator for the Maine State Housing Authority.

“The EIA projection strongly suggests funding for LIHEAP is not going to be sufficient,” said Mark Wolfe, executive director for the National Energy Assistance Directors’ Association.

If the heating oil costs increase as projected, the purchasing power of any funding declines.

“If Congress approves the president’s request to cut $4.1 million there will be widespread, significant hardships for Maine,” said Wolfe.

Republican Sens. Olympia J. Snowe and Susan M. Collins oppose the president’s request and joined 39 senators and 74 members of the House in a letter sent to Bush last month that urged the release of $200 million from the LIHEAP emergency fund before the end of the fiscal year.

Congress has not yet settled on the LIHEAP budget for fiscal year 2003.

“The possibility of substantial hikes is troubling, and it makes LIHEAP more important than ever,” said Doug Dunbar, spokesman for Democratic Rep. John Baldacci.

“People need to know the money will be there,” said Snowe spokesman David Lackey.

Supplies were plentiful of natural gas, the fuel used for heating in much of the country, especially in the Midwest, although prices were expected to edge up somewhat in the coming months, the EIA analysis said. Inventories of gas at the end of September were at an 11-year high for this time of year.

Propane, also used for heating in many rural areas, is in good supply as the winter season approaches, the agency said.

“Under normal weather circumstances, fuel supply conditions are expected to be sufficient to avoid any serious heating fuel price spikes this winter,” Caruso said. He said high oil prices and expectations of somewhat stronger demand than last year’s “are expected to generate higher winter fuel bills for most residential customers” compared to last winter.

Given a normal winter, the average price of heating oil in the Northeast is forecast as $1.35 a gallon with an average household expected to spend $934 for the heating season, compared with $643 last winter. The average expenditures two winters ago was almost $1,000.

The average household heating bill for those using natural gas was put at $710, compared to $596 last winter. That also was substantially lower than the average of $945 two winters ago.

Michael Melia of States News Service contributed to this report.