Winter fuel costs for many Americans could surge 28% this year from a combination of colder weather and higher energy prices.
According to the most recent winter fuels outlook from the Energy Information Administration, the average household primarily using natural gas for space heating will spend $931 on power from October to March, marking a $206 increase since last year.
“Higher forecast energy expenditures are the result of higher fuel prices, combined with higher heating demand because of a forecast of slightly colder weather than last winter,” the agency explained. “On average, we expect wholesale commodity natural gas prices to be higher this winter compared with last winter, which leads to higher prices for both natural gas and electricity in the retail market.”
Nearly half of American homes are heated using natural gas. With a winter 10% colder than the current base case, American households may spend $1,096 for the fuel, constituting a 51% increase since last season. A 10% warmer winter implies $862 in spending and a 19% increase.
Households in the Northeast which use natural gas will likely spend the most on energy this season, while households in the Midwest will see the highest increase in prices. Average household expenditures for the winter are projected to rise 27% for the Midwest, 23% for the West, 17% for the Northeast, and 15% for the South.
“Cold weather can affect household heating expenditures in two ways. First, cold weather raises the amount of energy required to keep a house at a specific temperature. Second, because cold weather raises demand and could cause supply disruptions, it can cause energy prices to rise, which could be more severe during a time of low fuel inventories,” the agency continued. “We forecast that natural gas inventories will remain below the five-year average as electric power and heating demand remain strong, but natural gas inventories will narrow the deficit to the five-year average by the end of winter.”
The rapid increase in electricity prices occur as a result of supply disruptions and the Russian invasion of Ukraine, both of which have contributed to overall inflation. Policies from the Biden administration, including canceled expansions to the Keystone XL pipeline project and slower approval for federal oil and gas leases, have likewise contributed to high fuel costs as policymakers emphasize a transition to renewable energy.
Such policies, however, have garnered criticism from business leaders. JPMorgan Chase CEO Jamie Dimon recently explained that despite the objective of reducing fossil fuel output in the interest of lower emissions, developing nations such as India, China, and the Philippines revert to coal power when oil and natural gas prices begin to rise, resulting in more pollution. Tesla and SpaceX CEO Elon Musk affirmed that developed nations will “need to use oil and gas in the short term” because the transition to sustainable energy “will take some decades to complete.”
Much of the European continent is presently struggling with soaring energy prices amid the Russian invasion of Ukraine. Ministers in the European Union are currently weighing various measures, including consumption limits, to help member states cope with a pause in Russian energy exports and the damage to the Nord Stream pipeline system.
