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Commodities Corner: U.S. consumers brace for double-digit percentage gains in winter heating bills

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U.S. consumers will face sharp increases in energy costs this winter no matter what type of fuel they use to heat their homes, according to a report from the Energy Information Administration released Wednesday.

The EIA forecast that U.S. households that primarily use natural gas to heat their homes will likely spend an average of $746 this winter, which runs from October to March, up 30% from the amount they spent last winter. About half of the homes in the United States use natural gas for space heating and water heating, according to the EIA.

Natural-gas futures have more than doubled so far this year, with an energy shortage in Europe and Asia contributing to tight supplies for the fuel. On the New York Mercantile Exchange, November natural gas
NGX21,
+0.15%

settled at $5.505 per million British thermal units on Tuesday, with front-month contract prices down more than 6% for this month, but up nearly 117% year to date, according to Dow Jones Market Data.

Read: Lofty prices for natural gas may fuel a swing back to oil as a power source

The increase in natural-gas expenditures “comes from both higher expected prices and higher expected consumption,” the EIA said in its Winter Fuels Outlook report.

“As we have moved beyond what we expect to be the deepest part of the pandemic-related economic downturn, growth in energy demand has generally outpaced growth in supply,” EIA Acting Administrator Steve Nalley said in a statement. “These dynamics are raising energy prices around the world.”

For the week ended Oct. 1, U.S. working natural-gas supplies in storage stood at 3.288 trillion cubic feet, down 532 billion cubic feet from a year ago and 176 billion cubic feet below the five-year average, according to a weekly EIA report issued Thursday of last week. The EIA will provide a weekly update on those supply figures on Thursday morning.

Households that primarily use heating oil, common in the Northeast, will spend an average $1,734, up 43% from last winter. Those that use propane for heating in the South and Northeast and Midwest, will spend an average $631 — that’s 54% higher than last year, the EIA said.

Households that primarily use electricity to heat their homes will spend an average $1,268 this winter on electricity bills, up 6% from last winter, the EIA said, adding that nearly two-thirds of homes in the South heat primarily with electricity.

The EIA also noted that the National Oceanic and Atmospheric Administration expects a slightly colder winter this year compared with last year so those colder temperatures are likely to increase U.S. energy consumption for heating this winter.

“The higher global and domestic energy prices that are resulting from economies beginning to grow again are going to translate into larger household bills for energy this winter,” Nalley said.

The Winter Fuels Outlook is a supplement of the government agency’s Short-Term Energy Outlook (STEO), which was also released Wednesday. The STEO report lifted its 2021 forecast for Henry Hub natural-gas spot prices by 14.9% from last month’s forecast to $4.17 per million British thermal units. It also lifted its 2022 price forecast by 15.6% to $4.01.

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