Warmer weather, lower energy prices are reducing home heating costs

Warmer weather during winter lowers demand for heating fuels, which in turn can lead to lower fuel prices

Warmer temperatures and lower energy prices have contributed to a reduction in US Energy Information Administration’s current forecast average heating expenditures this winter compared with the forecast in the Oct. 2015 Winter Fuels Outlook.

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Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2015 and January 2016 Note: Winter months include October through March.
 Each Oct., EIA produces a Winter Fuels Outlook that projects heating fuel expenditures for the coming winter (Oct. through March) based on EIA’s forecast of fuel prices and the National Oceanic and Atmospheric Administration’s forecast for temperatures (as measured by heating degree days).

As discussed in the Oct. 2015 Winter Fuels Outlook, the winter of 2015–16 was expected to have lower expenditures than the winter of 2014–15.

In the time since that outlook was released, the weather has been much warmer than expected, and prices have fallen faster than anticipated, resulting in even lower heating expenditures.

The warm temperatures compared with last winter have mainly been east of the Rocky Mountains. In the West, temperatures so far this winter are both slightly colder than previously forecasted and colder than last year’s relatively warm winter. At the national level, the 2015–16 winter is now expected to be 15 per cent warmer than last winter.

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Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2015 and January 2016 Note: Winter months include October through March.

Warmer weather during winter lowers demand for heating fuels, which in turn can lead to lower fuel prices.

Natural gas. In the Jan. Short-Term Energy Outlook (STEO), EIA forecast the retail price of natural gas, the most widely used primary spacing heating fuel, to be 6 per cent less this winter than last winter, compared with a forecast of 4 per cent lower in the Winter Fuels Outlook. Based on the most recent price and weather forecasts, EIA expects the average household that heats primarily with natural gas will spend about $110 (17 per cent) less on that fuel this winter compared with last year.

Heating oil. Prices for petroleum-based fuel have also been lower than expected because of falling crude oil prices. In the Oct. forecast, retail prices were expected to be 15 per cent lower than last winter, but they are now expected to be 29 per cent lower than last winter. The average household that primarily heats with heating oil is expected to spend about $760 (41 per cent) less on the fuel this winter compared with last year.

Propane. Forecast expenditures for propane are also lower than those in the Oct. outlook. In the Jan. STEO, winter 2015–16 expenditures for households that primarily heat with propane are expected to be 24 per cent lower than last winter in the Northeast and 31 per cent lower in the Midwest. In the October outlook, savings were expected to be 15 per cent and 21 per cent in the Northeast and Midwest, respectively.

Electricity. Because electricity prices change much more slowly than the prices of other heating fuels, changes in expenditures over the course of a winter are largely the result of temperature changes. For customers heating with electricity in the Northeast, Midwest, and South, where temperatures have been warmer than expected, winter heating expenditures are forecast to be 9 per cent lower than last year, compared with 5 per cent lower in the Oct. outlook. However, in the West, expenditures this winter are expected to be 9 per cent higher than last year, up from the 4 per cent expected increase in the Oct. outlook.

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Source: U.S. Energy Information Administration, based on U.S. Census Bureau 2014 American Community Survey