Households across the United States will spend more to heat their homes this winter because of higher fuel prices, the Department of Energy’s independent statistical arm is projecting.
Nearly half of U.S. households that warm their homes with natural gas can expect to spend an average of 30% more on their bills than last year, according to the Energy Information Administration.
The agency said that bills would be 50% higher if the winter is 10% colder than average and 22% higher if the winter is 10% warmer than average.
Households that use natural gas as their primary heating fuel will spend $746 this winter on average for their home-heating bill from Oct. 1 to March 31, compared with about $573 during the same period last year.
The EIA attributed the rise to higher commodity prices for natural gas, crude oil, and petroleum products, which are being passed through to retail prices, and the likelihood that the U.S. is set to experience a cold winter.
The issue of high energy prices more broadly has drawn the attention of the Biden administration, which fears political damage ahead of next year's midterm elections and a backlash against its agenda to move the economy off fossil fuels.
"While natural gas prices are not as visible to consumers as retail pump gasoline prices, any persistent spike will hit consumers already grappling with broadly rising prices," said Bob McNally, a former top energy official in the George W. Bush administration, who now leads the research group Rapidan Energy.
Oil and natural gas prices continue to climb higher in the U.S. as supply struggles to keep up with demand recovery from the return of economic activity as the coronavirus pandemic recedes.
Demand will increase more as temperatures begin to drop across the country and heaters are switched on in houses.
Rising natural gas prices, spiking to their highest level in over a decade, could present an especially big shock to the economy. Natural gas is the primary heating fuel for nearly half of U.S. households.
The U.S. economy has come to rely on natural gas as an electricity and heating source thanks to endless supply from the shale boom, and homes and businesses have grown accustomed to a long period of low prices.
But today, despite the increase in demand, U.S. natural gas producers are reluctant to drill more because they face growing pressure from Wall Street to demonstrate capital discipline. In addition, investors have soured on fossil fuels in response to public pressure to address climate change.
A key factor on whether prices keep rising is whether gun-shy shale producers hold back or step off the sidelines.
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Original Author: Josh Siegel