Many to see an increase in heating costs. Why, how much and what to do

Nov. 22—Amid warnings that home heating fuel prices are on the rise across the U.S. just in time for winter weather to arrive, local suppliers are signaling the increases might be less severe than it seems.

Household heating bills are forecasted to jump 30% to 54% over last year for natural gas, oil and propane customers, according to an independent analysis by the U.S. Energy Information Administration — and those figures could climb if temperatures are colder than predicted.

An estimated 3 in 5 Berks County homes are heated by one of those three energy sources, per a 2017 energy usage study performed by the U.S. Census Bureau.

Yet, while prices have undeniably risen for a variety of reasons in 2021, they're not approaching record highs, say suppliers and industry experts.

"In my opinion, the story is really about prices being so depressed last year," said Michael DeBerdine, CEO for Lancaster-based Rhoads Energy, which owns and operates a number of fuel suppliers in Berks including E.G. Smith Inc.

"Last year was such an anomaly when the petroleum and energy prices collapsed because demand just stopped in March," he said. "Any change at all is dramatic because we went from such low numbers last year that were unprecedented to where we are now."

When COVID-19 caused much of the global economy to shut down or slow to a crawl in 2020, worldwide fuel consumption fell with it, pushing prices way down.

Demand returned and, in some parts of the world, it's actually higher than ever, which has caused prices to rebound — but still nowhere near the highest levels.

"We're not even close to the numbers of 2008," DeBerdine said. "And it's actually been coming off a little bit."

'Intermediate issue'

DeBerdine sounded an optimistic note about short- and long-term pricing, noting several key factors that are already bringing costs back down.

More immediately, the fourth-warmest October on record in Berks and the sixth-warmest in the Lower 48 overall allowed wholesalers to build up their inventories during a time of year when they're typically drawing from their supply.

The bigger picture is that production is also catching up with demand, DeBerdine said. He pointed out that U.S. oil wells are still only operating at about 80% of capacity after the disruption caused by the pandemic.

That means, theoretically, prices could stabilize after one bad winter.

"It has a lot to do with countries trying to prepare their inventories for winter, and the push is on," he said. "We think this is an intermediate issue and don't see this as being the new norm."

Berks is also home to one of the largest petroleum storage facilities in Pennsylvania in Sinking Spring, with more fuel infrastructure in nearby Philadelphia, New York and Baltimore, so the region gets the slightest of reprieves in the form of lower transportation costs while being marginally less subject to market volatility.

'Maybe middle-high'

Any way you slice it, though, heating fuel prices are still up.

According to the Energy Information Administration's base-level forecast, natural gas prices are expected to rise 30%, oil heat by 43% and propane by 54% over last year — if average temperatures are 10% colder than anticipated, those figures could grow to 50%, 59% and 94%, respectively.

Conversely, if temperatures are 10% warmer, price gains for all three hold in the 22% to 30% range.

"If you're gonna put this year on a scale of top to bottom, you're gonna be somewhere maybe middle-high," said Kevin Steele, president of the Berks-Schuylkill Oil Heat Association, comparing 2021-22 prices to previous winters.

"There's always factors that can really sway it one way or another," he said.

Steele — who also serves as executive vice president for fuel supplier H.B. Steele and Son Inc. in Orwigsburg — points to government policies he says are driving the spike in prices, specifically the shutting down of natural gas pipelines, which creates supply constraints, as well as the prioritization of renewable energies that the majority of consumers don't currently have in their homes.

Furthermore, even with prices falling a bit in recent weeks, heating fuel suppliers that already stocked up from wholesalers at the higher price aren't going to mark down their existing inventory.

The outlook

Meanwhile, the winter 2021-22 forecast from the National Oceanic and Atmospheric Administration predicts that the seasonal temperature deviation across the Lower 48 will be a mixed bag.

But the December-to-February forecast is for warmer-than-normal conditions where most Americans live: east of the Mississippi River, across the South and into the Southwest.

The forecast is based on the existing La Nina conditions in the eastern equatorial Pacific Ocean, which is a cooling of those waters that is supposed to set off certain conditions in North America.

Similar conditions existed in the winter of 2020-21 and NOAA admitted in a March blog post that its forecast didn't turn out so well.

What's driving up prices

Steele's observation about natural gas constraints is perhaps especially prescient, as that has been one of the big drivers of price fluctuations.

A worldwide energy crunch brought about in part by the inability of supply — remember, COVID led to reductions in fossil fuel production — to meet increasing demand as the global economy continues its recovery from the pandemic.

At one point, natural gas prices in Europe, for example, were reportedly up over 400% from their year low and still remain elevated by more than triple, which has led a lot of U.S. producers to export the commodity.

When that starts to happen, it causes the prices of both natural gas at home and of other heating fuels to shoot up as well, particularly heating oil.

"Demand for natural gas in the European and Asian markets is at an all-time high, and the price for natural gas in those markets is much greater than the price in the United States, so there's a big draw to export," Steele said.

"There's a trickle down effect because electric plants and large industrial plants run on natural gas," he said. "When that happens, those utilities and those industrial places switch to heating oil. And when they switch to oil, now you have massive demand for oil out there and along with the weather changing."

What you can do

If you're worried about affording to heat your home this winter, there are programs that can assist.

UGI, the Berks area's largest provider of natural gas, asks customers with limited or fixed incomes to call 1-800-UGI-WARM to determine if they are eligible to enroll in a number of energy assistance programs; Pennsylvania residents can apply to enroll in LIHEAP, or the Low Income Home Energy Assistance Program, through the Department of Human Services at dhs.pa.gov; or check with your heating fuel supplier to find out what options they might have or local services they can direct you to.

If you do have the means, however, and want to try to insulate yourself from rising costs, suppliers offer a wide range of efficiency tips, though none more helpful than upgrading and maintaining the heating equipment.

"If they're ever going to invest in new equipment, the payback will be greater when prices are higher," DeBerdine said. "You'll get that return on investment much quicker."

While it might sound self-serving, those savings might even make up the difference when prices inevitably go up.

"People focus so much on price, but are not worried about the amount of consumption that they're using," Steele said. "To put it in terms of heating oil terms, people are worried about 20 cents a gallon, but not worried they're using 300 to 400 gallons more a year than they should be."

(Assistant news editor Keith Mayer contributed to this story.)