The Herald, Sharon, Pa.

The AP

October 9, 2007

Heating bills likely higher this year

NEW YORK — Almost all Americans will pay a lot more to heat their homes this winter, even though temperatures are expected to be warmer than average.

That’s the sobering message from an Energy Department report Tuesday that estimates heating oil costs are likely to jump 22 percent and natural gas bills, on average, will rise 10 percent between October and March.

And while the National Oceanic and Atmospheric Administration forecast a milder than average winter in most parts of the country, the agency also predicted Tuesday that temperatures will be 1.3 percent colder than last year.

Surging crude oil prices are the primary culprit for the jump in fuel oil costs. This spring and summer, American refineries experienced an unusual number of unexpected maintenance outages. The net result was that fewer refineries were producing gasoline, heating oil and other petroleum products.

The outages sent gasoline prices to a record $3.227 a gallon in late May as refiners scrambled to produce enough gasoline to meet the peak summer driving demand.

“Because they used every ounce of the refinery to produce gasoline, it came at the expense of distillate fuels” like home heating oil, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Despite the government forecast, natural gas futures prices have actually been mostly falling in recent weeks. Inventories remained high as new sources of natural gas were tapped this year and a cooler summer depressed demand.

But all of that could turn around if oil prices stay high and electricity plant operators switch to natural gas for units that can burn either fuel, said Ron Denhardt, CEO of Strategic Energy & Economic Research Inc., in Winchester, Mass.

The Energy Department estimated that a gallon of heating oil will rise to $2.88 this winter as crude oil prices stay high.

Heating oil is used by 7 percent of American households, mostly in the Northeast, while natural gas heat is used by 58 percent of households. Another 30 percent are heated by electricity, which the Energy Department estimated will rise 4 percent in cost this winter.

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