Home energy costs mirror oil prices

By Thomas Wilson
star staff
twilson@starhq.com

  Consumers flustered by high gasoline prices will face additional high energy bills this winter if they use petroleum-based products to heat their homes.
  Petroleum market watchers for the U.S. Department of Energy expect the demand for petroleum products to translate into higher home heating costs for heating oil, natural gas, and propane gas.
  A spokesperson with Blossman Gas who spoke on the condition of anonymity said the higher prices had not affected the company's residential and customer base. The company serves 1,300 residential and commercial customers. The representative said several customers are installing generators powered by propane gas in their homes as a back-up energy supply.
  The DOE's Energy Information Agency weekly petroleum status report released Thursday morning reported residential and wholesale prices of home heating oil ending Oct. 4 were $1.82 per gallon - a jump of 48 cents over prices during the first week of October 2003. Wholesale heating oil prices averaged 144.7 cents per gallon, an increase of 56.4 cents over the same period last year.
  The agency found residential heating oil prices for the 2004-2005 season opened at $1.76 per gallon last week in North Carolina and $1.75 per gallon in Virginia. Average residential prices were at $1.82 per gallon with the average prices for East Coast states hitting $1.83 per gallon.
  Heating oil prices and supplies are tracked through the East Coast and Midwest. Of the 8.1 million households in the United States that use heating oil, 6.3 million households or roughly 78 percent exist in the Northeast region of the country. The Northeast (which includes the New England and Central Atlantic States) remains the area with an appreciable share of oil-heated single family homes. In other regions, older homes have been converted from oil heat to gas heat, and oil no longer has a noticeable share of the new home construction market.
  In Tennessee, electricity dominates over half the home heating market with a 52 percent share, followed by natural gas with a 36 percent share, according to the EIA. Heating oil and propane gas remain heavily used throughout the state.
  Tennessee averaged 345,000 gallons of heating oil use each day between October 2003 and March 2004, according to EIA reports. The state's users of propane fuel averaged 582,000 gallons each day over the same period.
  Propane gas prices also are on the rise.
  The EIA's summary found as of Oct. 4 residential propane prices averaged $1.56 cents per gallon, which is 28 cents higher than one year ago. Wholesale propane prices averaged 91 cents per gallon - an increase of 26 cents from same period last year. Residential propane prices in North Carolina were reported at $1.56 per gallon and $1.90 per gallon in Virginia last week.
  Homes and businesses heated with natural gas will likely see higher energy bills this season.
  The EIA summary report indicated that with increased heating-degree days in regions with large percentages of gas-heated homes and continued high oil prices, the average natural gas wellhead price is projected to average $6.04 per million cubic feet (mcf), up nearly 23 percent from last winter's average of $4.92 per mcf.
  Residential prices for natural gas are projected to average $10.86 per mcf, up about 11 percent from the average $9.77 per mcf last winter. The EIA summary found residential natural gas prices had spiked considerably last summer from $9.60 in April to $11.47 in May and $14.33 in July.
  The United States has two sources of heating oil: Domestic refineries and imports from foreign countries. Most of the heating oil use occurs during October through March. Heating oil prices paid by consumers are determined by the cost of crude oil, the cost to produce the product, the cost to market and distribute the product, as well as bottom line of refiners, wholesalers and dealers.
  Some customers try to beat rising winter prices by filling their storage tanks in the summer or early fall when the prices are likely to be lower. However, most homeowners do not have large enough storage tanks to store the full amount needed to meet winter demands. Because homeowners may have to refill their tanks as often as four or five times during the heating season, possible rising or spiking prices are a concern.
  Refineries produce heating oil as a part of the "distillate fuel oil" product family, which includes heating oils and diesel fuel. The EIA reports if consumer demand is high for a seasonal product, such as gasoline, refiners may delay producing heating oil for the winter, which may lower inventories at the start of the heating season. The issue occurred in the summer of 2002 when refiners produced more gasoline to supply high gasoline demand. As a result, the 2002-2003 heating oil season started with low inventories.
  The Energy Department reported U.S. petroleum demand in 2004 was projected to average 20.4 million barrels per day, up 1.9 percent from last year. However, U.S. petroleum demand growth in 2005 was projected slow to 1.2 percent, in response to the combined effects of somewhat slower economic growth and high crude oil and product prices.
  As of Oct. 1, the Energy Department reported working natural gas inventories were estimated at 3.065 trillion cubic feet, close to the upper bound of the normal range and 222 billion cubic feet above the year-ago level at this time. Given continued net injections during October, working gas inventories by Oct. 31 are expected to be at their highest level since 1990.
  Heating oil inventories were 3.7 percent below year-ago levels on Oct. 1, but still well within the five-year average range. Propane stocks were estimated to be within the normal range and 10 percent above year-ago levels.