Winter Fuels Market (CRS Report for Congress)
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| Release Date |
Revised Dec. 15, 2008 |
| Report Number |
RL34714 |
| Report Type |
Report |
| Authors |
Robert Pirog, Specialist in Energy Economics |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The Energy Information Administration in its Short-Term Energy and Winter Fuels Outlook (STEWFO) for the 2008-2009 winter heating season initially warned consumers of the likelihood of higher heating costs. Average expenditures for those heating with natural gas were forecasted to see their expenditures rise by more than 18%. Home heating oil expenditures were forecast to rise by 23%, propane expenditures by 11% and electric heating expenses by 10%. The forecasted increases in total expenditures result from higher prices for all energy sources, as well as the expectation of a colder winter than the past several years.
A revised STEWFO, reflecting lower oil prices, projected declines in home heating expenditures for those using heating oil and propane. In contrast, heating expenditures were expected to increase for consumers of natural gas and electricity, although by less than initially forecasted.
However, oil markets have continued to experience downward volatility recently, with the price of crude oil falling over 50% compared to the peak price reached in July 2008. If the downward trend in oil prices continues through the winter 2008-2009 heating season, or stabilizes at a lower level, the expenditure estimates of even the revised STEWFO may be overly pessimistic. This is because the price of oil is a major factor influencing all the home heating prices surveyed in the STEWFO to some degree. The price of oil directly affects the prices of heating oil and propane, which are petroleum products. The price of oil indirectly affects the price of natural gas, and also, therefore, electricity through a historical price parity relationship.
The key risk factors for the STEWFO estimates are likely to be the extent to which the U.S. economy continues to experience an economic slowdown that results in further declines in the price of crude oil. Additionally, the variability of the weather could affect the expenditure estimates.
The Low Income Energy Assistance Program (LIHEAP), the primary federal program to assist with home heating costs, has been funded at higher levels than last year, and its eligibility requirements have been expanded. As a result, this program appears to be able to provide aid to consumers should heating costs escalate.
This report will be updated.
