- The Washington Times - Thursday, October 7, 2004

Heating bills will jump by 28 percent this winter for homeowners who use heating oil, while those who use natural gas will see their bills jump 15 percent on average, the government projected yesterday.

Costs could be even higher in the Washington area, which is due for a colder than normal winter, according to a forecast yesterday from the National Oceanographic and Atmospheric Administration.

Record oil prices, which hit a new high of $52.02 a barrel in New York trading yesterday, have driven up prices for heating oil, natural gas and related home heating fuels.

Critically, a dramatic reduction in gas production in the Gulf of Mexico caused by Hurricane Ivan last month will continue to hold down supplies into December, the agency said. Ivan destroyed seven drilling platforms, damaged several mobile rigs, and created 13 leaks in oil and gas pipelines.

Heating oil customers are concentrated in the Northeast, where the average household will pay $1,223 for heating oil this winter, double the price paid three years ago and up from $953 last year, according to the Energy Information Administration.

Washington-area customers, as well as others in the Mid-Atlantic and Midwest, mostly use gas to heat their homes. They will be paying $1,003 on average for the winter season from October to March, up from $870 last winter, the agency estimates.

The forecast assumes this winter will be somewhat colder than normal. If it turns out to be 10 percent colder than usual, heating costs will soar another 18 percent for gas users, the agency said.

“More than 60 million Americans rely upon natural gas to heat their homes, and high prices are a serious drain on their pocketbooks,” said Paul Wilkinson, analyst with the American Gas Association, in testimony before a Senate Commerce subcommittee yesterday.

Low-income consumers in particular will feel the strain this winter, he said, urging Congress to approve more heating assistance for hard-hit households.

Small businesses and industries that rely heavily on gas and oil also have been victimized by high prices. With gas prices nearly quadruple where they were in the 1990s, some say they may not be able to stay in business. Others are relocating to countries where energy prices are lower.

“My company has been faced with major cost increases that threaten our survival,” said Gary Huss, president of Hudapack Metal Treating Inc., a Midwestern manufacturer that employs 160 workers and relies on natural gas both for electric power and its metal-production processes.

“We provide relatively high-paying jobs along with good health, life, short-term disability and retirement plans. But maintaining these jobs and benefit levels has been very difficult since natural gas prices began skyrocketing in 2000,” he said in testimony on behalf of the National Association of Manufacturers.

“We are limited in our ability to pass energy cost increases on to our customers,” Mr. Huss said. “Our customers can simply turn to foreign producers who do not suffer the same high structural cost burdens that we do.”

The gas association warned that strongly growing demand for gas will push prices to even more punishing levels unless political leaders allow more drilling for gas and oil on federal lands and facilitate imports of liquefied gas from abroad.

“Without prudent elimination of some current restrictions on U.S. natural gas production, producers will struggle to increase, or even maintain current production levels in the lower-48 states,” Mr. Wilkinson said.

“This likely would expose 63 million homes, businesses, industries and electric-power generation plants that use natural gas to unnecessary levels of price volatility — thus harming the U.S. economy and threatening America’s standard of living.”

While gas prices have been rising steadily all decade, oil prices jumped precipitously this year amid tightening supplies, growing demand and threats of disruption. Many analysts expect prices to stay elevated and continue to eat into consumers’ incomes in the years ahead.

Richard Berner, economist with Morgan Stanley, expects oil prices to stay high and cut economic growth in the United States and worldwide by one percentage point next year as energy costs eat into consumers’ spending power.

“A cold winter would magnify risks of even slower growth,” he said.

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