The fall season may be my favorite time of the year because there is always something special upon which we can focus our attention.
For sports enthusiasts, October presents unique opportunities relating to pennant races and World Series hopes along with fantasies about the ideal football bowl game lineups. Spotlights are also usually directed upon the spectacular Autumn coloramas perennially painted by the changing of the leaves.
This year, something new (and neither beautiful nor inspiring) has been added, and depending on the weather conditions, it could cost a pretty penny; well, actually a bit more than a penny, but you get the idea.
October through March is normally considered the winter heating season. Predictions regarding fuel costs, although subject to some uncertainty due to weather conditions, now call for prices to rise—in some cases dramatically.
While home heating prices often go up this time of year, hurricanes Katrina and Rita have strained operations associated with natural gas production and processing. As a result, according to the US Energy Department, residential space-heating expenditures are expected to experience an increase of about $350 or 48% over the past winter.
There are more than 68 million natural gas customers across the US. The popularity of natural gas is due in part to its efficiency, cleanliness, and reliability. During the last several years, natural gas production has struggled to meet the growing demand. The tight balance between supply and demand has been reflected in the market price which has more than tripled over the past five years.
Last year, the average gas user nationwide expended about $700 to heat a residence over the winter months. In the Midwest, where more people rely on natural gas for home heating, the average cost went up to approximately $950. Clearly, if costs go up as projected, the dent in family budgets will be notable.
Those households that heat primarily with heating oil can expect to pay 32% more during the 2005-2006 winter. Homes heated by propane are forecast to see expenses climb some 30% over last year. Electric-heated residences will be faced with a 5% price hike on the average, though it will be higher in areas with substantial dependence on natural gas for power generation.
Costs could be significantly higher, of course, if the winter weather is severe. This is a possibility for the Northeast, but the National Oceanic and Atmospheric Administration is suggesting otherwise for much of the Midwest and Pacific Northwest. The National Weather Service has offered a bit of good news, with a forecast calling for warmer than normal weather for much of the central and western US, including Texas. More good news relates to the natural gas supplies, which are predicted to be sufficient to meet the winter demands despite the disruptions along the Gulf Coast.
At the beginning of October, stored gas in the US totaled 2.9 trillion cubic feet. By the middle of next month, this amount will have increased to some 3.2 trillion cubic feet, an adequate volume to meet expected needs. Even though there will be a substantial quantity of natural gas available, utilities have been paying significantly more for the fuel they have been placing in storage recently, and could face even higher prices over the next several months. This factor is one of the contributors to the upward swing in costs to customers.
Natural gas meets one-fourth of the nation’s total energy requirements. Demand for natural gas in the US is predicted to increase nearly 40% over the next 15 years. Texas is the nation’s largest natural gas producer and provides more than 30% of the US total. The temporary interruptions along the Gulf Coast are not expected to have any long-term effect on the industry in Texas.
So, how do we lower natural gas costs? In the short run, we don’t. The only ways to reduce prices are to either increase the supply or lower the demand. The high price levels and new energy law will help spur additional gas production in the long run. High costs also encourage conservation, but demand is expected to grow in the future thanks to expansion in our economy and population.
There is every reason to believe prices will stabilize once the aftereffects of the recent hurricanes are relieved. Chances are, however, that it will be too late to meaningfully affect the cost of heating this winter.