Gov't Warns of Higher Heating Costs

U.S. consumers will see their natural gas bills rise 15 percent this winter compared to last year, and pay 28 percent more to warm their homes with heating oil and 22 percent more to heat with propane, the government said on Wednesday.

"This winter, tight global oil markets and elevated crude oil prices are expected to result in higher heating oil, natural gas and propane prices," the Energy Information Administration (search) said in its annual winter forecast.

The average household will pay a total of $1,003 to heat with natural gas this winter, up from $870 last winter.

The average heating oil bill is forecast to jump to $1,223 from $953 last winter, and propane costs will increase to $1,396 from $1,147.

Demand for natural gas (search) is forecast to be up 1.5 percent this winter, but heating oil (search) use is projected to be "slightly below" last winter, EIA said. Demand for propane is expected to rise 1 percent.

"Not only is the typical residential and commercial customer expected to increase natural gas consumption during this heating season compared to last winter, but the number of such customers is expected to increase as well," the agency said.

The average wellhead price for natural gas is projected to be $6.04 per thousand cubic feet this winter, way up from last winter's average of $4.92, and the residential price will be almost double that level, EIA said.

The Energy Department's analytical arm said it expects U.S. winter oil prices to decline from this week's record $51 a barrel, but still average $46.43 in the current quarter and $44.71 in the first quarter of next year.

EIA said below-normal oil inventories in the United States and other industrial countries have raised concerns about the adequacy of supply to meet growing oil demand, and as a result the average monthly U.S. oil price is not expected to fall below $40 a barrel until the end of 2005.

Oil inventories remain below normal largely because almost 500,000 bpd of U.S. oil production was lost in September due to hurricanes in the Gulf of Mexico, the agency said.

Total U.S. oil production in September averaged 5.03 million bpd, the lowest level since at least 1954, the EIA said.

"Industry officials estimate that resumption of normal (Gulf oil production) operations could take between 45 and 90 days," EIA said.

Oil prices have also been rising because of strong demand from rapidly developing countries in Asia like China and India.