Heating bills may rise 42%, U.S. says

Forecast of colder winter, fears over Iraq are factors in fuel-price predictions

September 21, 2002|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Consumers should brace themselves for higher fuel prices this winter that could increase home heating bills by as much as 42 percent.

Solid growth in world oil demand this winter will likely tighten world oil markets and reduce commercial oil inventories, according to forecasts by the U.S. Department of Energy.

And while natural gas in storage remains ample, an expected recovery in the nation's power and industrial sectors could also drive up demand for natural gas.

Consumers in the Northeast can expect to see heating oil bills rise to an average of $912 this year from $642 last year.

Natural gas bills for Midwestern families are expected to increase to $700 this year, up 17.5 percent from $596, according to Energy Department statistics.

Demand for fuel is expected to rise as weather forecasters are predicting colder temperatures this winter compared with last year. And continuing speculation about a war with Iraq could drive prices higher.

"It's pure speculation what could happen," said John C. Felmy, director of Policy Analysis and Statistics at the American Petroleum Institute, an industry trade group. "I can't speak to what, or if there's even a `war premium' out there. The markets are nervous.

"But consumers should look at the forecasts, look at the futures market, talk to their gas utility or propane or heating oil supplier, and see what options are available to them," Felmy said. "Then they have to figure in the risks that they are willing to bear."

Even as demand rises, OPEC announced Thursday that it would keep production of crude steady for the time being. It also blamed prices that reached about $30 a barrel on worries that the United States will attack Iraq.

Crude oil for October delivery rose 11 cents to $29.61 a barrel on the New York Mercantile Exchange yesterday

The natural gas market has frequently followed the oil market, said Bill Transier, chairman of the Natural Gas Supply Association, in its winter outlook announcement this week.

"If we go to war with Iraq, and if oil prices go up in response, we believe there will be upward pressure on the natural gas market," Transier said.

While there is an ample supply of natural gas, production is down about 1.7 percent, which could affect prices, according to the Energy Department.

"You can't predict the weather," said J. Hollis B. Albert III, president of Operators Energy Services, which sells heating oil and natural gas in Maryland. "It's business as usual so far. A lot of people are sitting back because the prices are up about 5 percent this week, but it could drop off next week. It's hard to crystal ball this thing."

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