Home heating cost to rise

Oil users hit with a 23% hike

By H. Josef Hebert ASSOCIATED PRESS | Wednesday, October 8, 2008

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Heating U.S. homes with oil this winter will cost $450 more than a year ago, another slap to families already reeling from high gasoline and food costs and fearful of losing their heat because of unpaid bills.

Gas, propane and electricity for home heating will go up as well, but not as much, the government says.

Even as oil prices are plummeting and plenty of natural gas is going into storage, people should brace for higher heating bills "across the board" no matter what fuel is used or region of the country, said Howard Gruenspecht, acting chief of the federal Energy Information Administration.

But fuel oil users — about a third of households in the Northeast — will experience the biggest hit with an expected heating bill of $2,388 on average for the October-March heating season, or 23 percent higher than what it cost last winter.

The price of natural gas, the most widely used heating fuel used in half of the nation's households, will increase an average of 18 percent, or $1,010 over the heating season — about $155 more than last winter. People who heat with propane or electricity will see a 10 percent to 11 percent increase in costs, the agency said.

Natural gas supplies will be plentiful this winter, with storage in November expected to be well above the five-year average, and prices have dropped below what they were a year ago. But many utilities purchased gas for storage this past summer when prices were at their peak and will pass those costs onto customers this winter.

Mr. Gruenspecht acknowledged the winter fuel cost estimates are based on assumptions made before the latest Wall Street credit crunch and the possibility of a more severe global economic decline. That could push down oil prices and, in turn, ease prices somewhat for fuel oil and propane.

"The economic picture is perhaps the biggest uncertainty today," Mr. Gruenspecht acknowledged.

But he said he doubts the EIA's winter-long price projections are likely to change dramatically. "People are already buying fuel oil ... it's not like people are going to delay their first purchase until February to take advantage of what might be lower prices."

Ray Henry, managing member of Husky Heating Oil in Columbia, does not think it's a good idea to handcuff consumers to a specific rate in an ever-changing market.

"I know that there are competitors who lock people in but it's not in anyone's best interest to do that because your customers are going to get upset and might leave," Mr. Henry said.

• Jeff Canning contributed to this report.

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