Colder Winter, Worsening Economic Conditions Point to Higher Natural Gas Costs

Jason Hicks |

WASHINGTON — According to the National Oceanic Atmospheric Administration’s (NOAA) most recent projection of heating degree-days, the lower 48 states are forecast to be 2.4% colder this winter compared to last winter, so households heating primarily with natural gas are expected to spend an average of $155 (18%) more this winter, according to the United States Energy Information Administration (EIA).The increase in natural gas expenditures reflects the combined effects of a 17% increase in price and 1% increase in consumption, EIA reports. In the Midwest, where 72% of all households rely on natural gas, a projected 17% increase in average household expenditures results from a 19% increase in prices and a decline in consumption of 2% due to the forecast of slightly warmer weather than last winter in that area.Total natural gas consumption is expected to increase by 2.4% in 2008 and by 1.9% in 2009. Despite slower projected growth in 2009, consumption is expected to increase in all sectors during the forecast period. This winter, total residential consumption of natural gas in the United States is expected to increase by 3.5% year-over-year based on the projected 2.4% increase in heating degree-days. In addition to weather, worsening economic conditions add uncertainty to the forecast, particularly for the industrial sector, EIA says. In annual terms, consumption in the industrial sector is expected to increase by 1% in 2008 and 1.1% in 2009.The American Gas Association (AGA), which represents 202 local natural gas utilities in the U.S., explained at a recent press conference that while current production activity and storage figures remain strong, several factors will contribute to the likely 10-30% increase in home-heating costs this winter.“While natural gas prices have declined substantially since reaching their all-time highs in early July, they are still higher than they were at this time last year,” said Chris McGill, AGA’s managing director for policy analysis. “Because utilities purchase natural gas from suppliers throughout the year and store it in underground facilities for winter delivery, much of the natural gas utilities will deliver to households this year was purchased when prices were at or near these historic highs.”In addition to the increase in natural gas prices, households heating primarily with propane can expect to pay an average of $188 (11%) more this winter, EIA says. Propane-heated households, which represent about 6% of total U.S. households, are projected to see an average increase of 11% in propane expenditures this winter, but that increase varies widely by region, EIA says. Western households are expected to see an average increase in expenditures of 5%, while homes in the South are expected to spend 16% more this winter.Households heating primarily with electricity can expect to pay an average of $89 (10%) more. Thirty-five percent of all U.S. households rely on electricity as their primary heating fuel, ranging from 12% in the Northeast to 59% in the South. On average, electricity expenditures during the winter are projected to rise by 10% because of increased consumption and prices. Households in the South are projected to pay 13% more this winter on electricity bills. 

About the author

Jason Hicks

American Drycleaner

Jason Hicks was assistant editor for American Trade Magazines, which publishes American Coin-Op, American Drycleaner and American Laundry News, for more than nine years, and web editor for three years.


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