By Richard Valdmanis
BOSTON, Oct 27 (Reuters) – After shelling out about $1,000 a
month to heat his 190-year-old Massachusetts bed and breakfast
during a harsh winter last year, Brian Weinrich is hoping for
some relief this season. By all accounts, he should get it.
Americans are likely to see their lowest heating bills in
years thanks to a glut in the domestic fuel supply and
predictions of milder winter weather, forecasters and regional
fuel dealers say, a welcome outlook after record snowfalls and
repeated price spikes over the past two seasons.
“I’m hopeful for a bit of a break,” said Weinrich, 67, whose
1824 brick and wood-frame building in the Berkshire mountains is
a seasonal draw for snowshoers and skiers.
The U.S. Energy Information Administration predicted this
month that households using natural gas as a heating fuel are
likely to spend an average 10 percent less this winter than
last, while those using heating oil could see bills down 25
percent to their lowest since 2009.
Since then, energy futures have dropped even further.
Natural gas touched a three-year low below $2 per mmBtu
this week, while heating oil dipped to around $1.43 a
gallon, near their lowest level since the aftermath of the 2008
financial crisis.
“The pass-through from wholesale to household is not quick,
but over the long-term these further declines will reach
people,” said EIA spokesman John Cogan, referring to this week’s
drop in futures prices.
About half of U.S. households use natural gas as a heating
fuel, while less than a quarter – mainly concentrated in New
England – use heating oil.
One of the main reasons for the reprieve is America’s
years-long drilling boom, which has topped up domestic supplies
and helped tip energy markets into a price nose-dive.
The rise of fracking technology, which involves pumping
water, sand and chemicals into a well to extract oil or gas, has
helped lift U.S. production of natural gas by 35 percent since
2005 and oil by 45 percent since 2010.
The OPEC producer group led by Saudi Arabia, meanwhile, has
kept price pressures low by leaving oil spigots open in an
effort to retain global market share even as Chinese demand
growth has slowed.
Another key is weather. An El Nino weather event,
characterized by unusually warm water off South America’s
Pacific coast, promises higher temperatures for much of the U.S.
North and Midwest, the biggest heating fuel markets, according
to the National Oceanic and Atmospheric Administration.
That should reduce demand for heating fuel.
“This is going to be helpful,” said John Drew, director of
the Action for Boston Community Development, which helps poor
households cover their energy costs.
“It will be great if people get a few more gallons out of
their money, but it doesn’t mean life will be easy,” he said,
adding that winter heating bills are among the biggest
challenges facing the region’s poor.
The steep decline in heating oil prices that began in the
middle of 2014 has slowed a gradual years-long shift among New
England households from fuel oil to natural gas. But pipeline
construction has lagged, which experts said could still lead to
localized price hikes for gas and electricity in the region
during cold snaps.
Pipeline capacity has been added to deliver natural gas to
the New York market since last year, but “constraints still
exist in the Northeast”, the EIA said.
In Maine, where a larger share of households heat with fuel
oil than in any other state, heating oil companies said
customers were celebrating sharply reduced costs.
“In this area, and a lot of New England, we have big old
historic homes that burn a couple thousand gallons of oil a
year,” said Gary Nash, owner of Main Street Fuel in Richmond, in
south coastal Maine. “So when you cut costs in half like we’ve
seen this year, that’s a tremendous savings.”
More than seven in 10 Maine households continue to use fuel
oil as their primary energy source for home heating.
(Additional reporting by Dave Sherwood; Editing by Alan Crosby)
