WASHINGTON – With an expectation of a colder temperature, increase in demand will drive up the price of residential heating fuels this winter, according to a report released Wednesday.
The new energy outlook report, conducted by Energy Information Administration, projected that the overall residential heating fuels price would increase eight percent because of greater demand.
A climate prediction expert forecasted the winter would be colder east of the Rocky Mountains compared with last year, which could push natural gas demand this winter up by nearly 14 percent.
Bruce Henning, natural gas and energy economics professional to ICF International, argued that the price of natural gas would recover but would not go up significantly.
“Natural gas is extremely abundant,” Henning said. With increasing production of domestic shale gas, the demand and supply of natural gas likely stay in balance, keeping the price low over the next 18 months, Henning added.
Another reason he pointed out is that the past warmer winter drove down the natural gas price, and it would likely continue to firm and remain below the prices during much of the previous decade.
Natural gas has become the most popular heating fuel across the nation. Almost half of U.S. households heated their homes with natural gas, according to the outlook report.
Experts forecast that demand for heating oil is expected to jump 17 percent.
The report predicted that the price of heating oil – which will remain almost three times more expensive than natural gas – would average two percent higher than last year.
The possible oil price spike would affect users in the Northeast the most. Heating oil accounted for six percent of U.S. heating fuel consumption, and eight out of 10 located in the Northeast, according to the outlook report.
Experts said the high oil price reflected lower stocks in the East Coast and Gulf Coast states and a shortage of supply that is influenced by the international oil market.
Edward Morse, managing director and the global head of commodity research at Citi Group Global Market, Inc., said globally geopolitical crisis on the supply end and the output reduction in North Sea might affect oil production, which cannot satisfy the increasing demand of markets like China.
Despite higher price for this winter, heating oil users in Northeast might not switch to natural gas immediately, said Henning, natural gas expert.
“It depends on the geography where the natural gas service is and how easy it is to extend it to a new household,” Henning said. “Another thing it depends on is how old is your furnaces.”
But he pointed out that even for New England, where the majority of households are still burning heating oil, people have started switching to other fuels.