Fuel for thought: Colder temps could hike heating costs nearly 20 percent

ROCHESTER — Colder temperatures this winter are expected to bring with them increased heating bills.
Compared to last year, this winter is expected to be 18 percent colder in the Northeast, according to the National Oceanic Atmospheric Administration (NOAA).
While the price of heating oil, natural gas, and electricity are expected to be relatively stable, colder temperatures will mean greater fuel consumption, which translates into higher heating bills, according to the annual Winter Fuels Outlook released last week by the U.S. Energy Department’s Energy Information Administration.
Yet despite the colder weather, this winter’s temperatures are expected to be 2 percent higher than the 30-year average, said Jonathan Cogan, energy informational specialist at the Energy Department’s Energy Information Administration (EIA).
“Although the NOAA forecast is calling for above normal temperatures, that would still translate to significantly colder than last year,” Cogan noted.
With colder temperatures, consumption of heating oil this winter is expected to increase by about 17 percent in the Northeast. Assuming this year’s winter will go according to the forecast, and taking into account the expected increase in crude oil prices, the average heating bills for heating oil customers in the Northeast would rise by 19.5 percent, said Cogan.
“It’s a significant increase; however, it is largely due to the weather. The weather forecast is highly uncertain,” said Cogan.
He noted that the price of heating oil largely depends on unpredictable international crude oil markets.
“Supply and demand balance worldwide will affect the price of crude oil,” said Cogan. “It’s notoriously hard to predict in even the short run what’s going to happen to crude oil prices.”
According to recent predictions by EIA, the price of heating oil this winter will be about 8 cents per gallon higher in the Northeast than last winter. This represents an increase of about 2 percent.
For those in the Northeast who use natural gas, heating bills are expected to increase by 21.4 percent on average. Consumption of natural gas is estimated to increase by about 16.7 percent, while the prices of natural gas are expected to increase only slightly.
For Northeast residents who use electricity to heat their homes, their bills are expected to increase by a lower amount. Electricity consumption, for heating and for other uses such as appliances, is expected to rise by 10 percent, and the average electric bills in the Northeast would go up by 6.4 percent, assuming the weather this heating season goes according to the forecast.
While higher heating bills may be difficult for some consumers, colder temperatures would mean good news for local propane and heating oil delivery businesses.
“From our perspective a colder winter would be good,” said Steve Wallace, co-owner of Local Pride Heating Oil in Rochester, who said last year, like in the past four years, he has seen less demand for heating oil.
“We are dependent more on weather than most businesses,” said Wallace. “The whole thing with the oil industry is you have 100 days to make money for the whole year.”
During warm temperatures last winter, Local Pride saw a 20-percent drop in sales, said Wallace, and three of his employees were let go as a result, one of whom was hired back in anticipation of the approaching winter season. Local Pride is also selling two of its six oil delivery trucks, because “we just don’t need them,” said Wallace.
If this winter is met with colder temperatures and higher heating oil demand, Local Pride will look to potentially hire one or two part-time drivers. However, Wallace is not optimistic about what this winter will bring.
“I’ll believe that it’s cold when I’m bundled up against it,” he said.
Jeff Taylor, chief operating officer of Eastern Propane & Oil of Rochester, said that with forecasts of normal or slightly warmer than normal temperatures this winter, local propane and heating oil dealers will likely see 15 to 20 percent more sales than last winter.
While 80 percent of all U.S. homes heated with heating oil are located in the Northeast, according to Cogan, Taylor said his company over the past several years has seen customers switching from heating oil to propane.
“This is an industry trend,” said Taylor. “Heating oil consumption in New England and New Hampshire has been decreasing over the last decade.”
On Thursday, EIA released that residential heating oil prices in the U.S. were $0.294 per gallon higher than a year ago, while residential propane prices decreased by $0.402 per gallon.
While heating oil prices tend to be volatile, Taylor said prices of propane and natural gas have been stable because they are widely produced in the United States.
Wallace also noted he has seen more customers supplementing their heating oil with wood or pellet stoves.
Don Chagnon, co-owner of Borderline Fuels in Somersworth, said he, too, has noticed a trend of customers switching from heating oil to propane.
Last winter, Borderline Fuels saw slightly lower demand for heating oil, but demand for propane has slightly increased. Chagnon said his company began offering propane in 2006, and put a higher focus on the product in 2010.
After last year’s warm winter, Chagnon said he is preparing for this winter being about 5 percent warmer than normal. Since April, Borderline Fuels has been encouraging customers to get on a budget plan to help them afford their propane or heating oil this winter.
“We want to make sure people stay warm all winter,” said Chagnon. “People have to heat in the wintertime — in New England we don’t have a choice.”
While the need for heating fuel will likely increase this winter, federal funds for fuel assistance for low-income families are expected to be at last year’s levels, said Celeste Lovett, fuel assistance program manager for N.H. Office of Energy and Planning.
Last year, New Hampshire received about $26 million for fuel assistance from the federal government, and 38,021 state residents qualified for fuel aid. This year, the funding level, and number of people qualifying for fuel assistance, is expected to be the same.
Lovett encouraged residents who think they may need assistance this winter to apply now, and avoid waiting until wintertime.
“We don’t want people to wait until they are in an emergency situation,” she said.

On Thursday, Lovett said it’s still unknown how much funding will be awarded to New Hampshire’s Fuel Assistance Program. She said it’s also too early to tell how many people will be seeking assistance this winter.
“It just makes sense if we have higher prices and a colder winter we will get more people who apply,” said Lovett.