New York Times 10-7-2014 Energy Likely to be Cheaper this Winter

Tim McElwain

HOUSTON — After enduring frigid temperatures and higher energy costs last winter, many American consumers will spend considerably less this winter, mostly because a warmer season is forecast, the Energy Department projected on Tuesday.

The roughly half of American households that heat with natural gas can expect a decline of 5 percent in their gas expenditures despite slightly higher residential prices as homes use 10 percent less gas, the department estimated in its report on winter fuels.

Homes that rely on heating oil, mostly in the Northeast, can expect to spend 15 percent less this winter because of the recent drop in world oil prices. Homes that heat primarily with electricity, the norm through most of the South, can expect to save 2 percent, with 3 percent higher prices but 5 percent less consumption.

But the biggest savers will be the mostly rural and Midwestern users of propane who are expected to spend 34 percent less this winter, because of 24 percent lower prices and 13 percent lower consumption. Millions of Americans struggled to heat their homes last winter because there was a shortage of propane, not only because of the cold weather but also because more propane than usual was used to dry corn after a particularly wet harvest.

“U.S. households in all regions of the country can expect to pay lower heating bills this winter,” Adam Sieminski, administrator of the United States Energy Information Administration, said in a statement, “because temperatures are forecast to be warmer than last winter and that means less demand for heat.”

Gasoline consumers can also expect lower prices. Regular gasoline retail prices fell to an average of $3.41 a gallon in September, from an average of $3.69 a gallon in June, and the Energy Department projects further drops to $3.14 a gallon in December. The annual national average has fallen from $3.51 a gallon in 2013 to a projected $3.45 for 2014 and $3.38 a gallon for 2015.

The lower energy prices should help consumers, especially working-class families that spend a high proportion of their income on fuels, and retail and restaurant businesses. Many industries, including airlines and manufacturers of petrochemicals, chemicals and plastics, are also helped by lower energy prices that bring down their costs and increase their profits.

The average family that uses natural gas for heating will spend $649 this winter, the Energy Department projects, compared to $680 last winter, a three-year high. Spot gas prices spiked last winter because of the limited natural gas pipeline capacity, particularly in New York and New England.

Much of the lower price for energy can be attributed to the soaring production of oil and natural gas in shale fields in Texas, North Dakota, Pennsylvania and several other states.

The Energy Department noted that daily oil production in September averaged 8.7 million barrels, the highest monthly total since July 1986. Natural gas production is also rising, and there has been a record build in inventories largely because of the “mild summer that resulted in less electricity generation to meet air-conditioning demand,” Mr. Sieminski said in a statement.

The Energy Department report said that the latest forecasts of the National Oceanic and Atmospheric Administration for the coming winter, which it noted could change, show much warmer weather than last winter east of the Rocky Mountains. The Midwest is predicted to be 16 percent warmer, the South 12 percent warmer and the Northeast 11 percent warmer.