Budget More to Keep Warm This Winter

This past August, I checked in on supply levels for the three main heating fuels: Natural gas, heating oil and propane. The key takeaway: While shortages are unlikely, there’s less of all three fuels in storage this year than last year, which creates the potential for higher prices.

Now that the calendar says October and there’s a chill in the air across much of the country, what should energy users be expecting when it comes to prices and heating costs this winter?

Much will depend on the weather, but it seems clear that most households and businesses will pay at least a bit more to stay warm this season than they did last year. Partly that’s because last winter was abnormally warm across much of the U.S., and history probably won’t repeat itself. But the main reason to expect higher bills is simple: Fuel prices are starting the season noticeably higher than they did in 2016.

How much higher? Residential propane users are paying 24 cents more per gallon now than they did this time a year ago. Heating oil users (most of whom reside in New England and the Northeast) are paying 28 cents more. Residential prices for natural gas are harder to track down, but of the states for which the Department of Energy publishes residential prices, all but Florida have been paying higher prices this year than one year ago. Odds are, fuel prices will rise at least gradually over the course of the autumn and winter, as stockpiles are drawn down to keep up with consumption.

Folks who rely on electric heat should also expect higher prices. Through the first seven months of 2017, residential electric rates are up about 3% and will probably continue on that trend into winter. For the Southeast and other regions that primarily rely on heat pumps and other electric-powered heat sources, that will have a widespread impact on monthly bills. (In some parts of the Southeast, residential electric rates are climbing even faster than the 3% national average.)

Temperature Outlook

So, energy prices are up. But how cold is it likely to be this winter? Higher prices don’t dent your wallet too badly if temperatures are mild and your furnace, boiler or heat pump isn’t running very often.

Mike Halpert, deputy director of the National Oceanic and Atmospheric Administration’s Climate Prediction Center, recently shared his agency’s winter outlook with reporters. Keep in mind that such long-range forecasts are based on probabilities rather than predictions of specific weather events, and that long-range forecasting is still a very inexact science.

Overall, government forecasters are calling for a warmer-than-normal winter. Halpert attributes that to the climate phenomenon known as La Niña, in which cooler-than-normal water in the tropical Pacific Ocean influences weather patterns in the United States. (La Niña conditions haven’t officially formed yet, but the Pacific is trending in that direction.) La Niña winters tend to be warmer and drier than average. This year, NOAA expects above-average temperatures across the southern two-thirds of the country, with odds favoring colder-than-normal weather across the northern third. And while NOAA expects a warmer-than-average winter overall, Halpert thinks it’s unlikely to be as warm as the previous two winters, which ranked warmest and sixth-warmest, respectively, on record.

Of course, even during a warm winter, there can be periods of severe cold, and those can cause heating prices to jump. I asked Halpert if the current climate pattern might be conducive to the sort of “polar vortex” cold snaps that swept much of the U.S. in early 2014 and caused price spikes in heating oil and propane. Some areas actually experienced temporary fuel shortages because of heavy demand. He said a replay of that scenario is “not favored” by the current pattern, though it can’t be ruled out entirely.

If NOAA’s forecast pans out, most folks can probably look forward to fairly modest heating bills, albeit higher than last year, when temperatures were mild and fuel prices were low. The biggest exception might be households in the northern tier of the Midwest and northern New England. Those regions have the best chance of seeing below-average temperatures. And they rely most heavily on the two fuels – heating oil and propane – that have already seen the biggest price increases since last year.