Thursday, September 30, 2004
The cost could affect the presidential race in Ohio.
WASHINGTON (AP) -- As if $2-a-gallon gasoline hasn't been bad enough, people now should be bracing for sharply higher heating bills this winter whether they use oil or natural gas to warm their homes.
A looming winter energy crisis, while unlikely to grab hold before the Nov. 2 elections, also could become a growing issue in the presidential race as President Bush and Democrat John Kerry wrangle over who is to blame.
The natural gas industry, in a report out today, said that though there is plenty of gas in storage, the market is expected to remain tight because of increased demand, the higher wholesale cost of gas and expected colder-than-normal weather.
"This tight market could really impact customers' bills in some regions, particularly during extreme weather," said Joseph Blount, president of the oil and natural gas company Unocal Corp. and chairman of the Natural Gas Supply Association.
A bigger shock
And heating oil costs are likely to shock consumers even more. With crude prices at near $50 a barrel, heating oil prices have soared as well to nearly twice what they were at the same time a year ago.
Soaring energy costs -- whether at the gas pump or in the jump in natural gas and heating oil costs -- have been a drag on the U.S. economic recovery and could be a factor in the presidential race, especially in politically critical cold-winter states such as Ohio, Michigan and Wisconsin.
While voters seem to have taken this summer's high gasoline costs in stride, the double whammy of $2 a gallon gas and record heating bills may be another matter. Still, the heart of heating season is a few months away, and the impact in many regions of the country is unlikely to be felt until well after the election.
Although oil prices retreated slightly Wednesday after government data showed U.S. inventories of crude grew last week, the cost of crude for November delivery was still $49.51. It was just under $30 a barrel a year ago.
Prices jump
Gasoline prices had been declining but reversed course last week, as prices jumped by a nickel on average nationwide to $1.92 a gallon for unleaded regular, according to the Energy Department. That's still down from a peak of $2.06 a gallon reached in May, but is 33 cents a gallon higher than this time a year ago.
The wholesale spot price for heating oil increased to $1.38 a gallon Wednesday on the New York Mercantile Exchange. A year ago in the weeks leading up to the heating season, the price was 74 cents a gallon, according to the Energy Information Administration.
Natural gas prices, in the $5-plus range much of the summer, jumped by 62 cents Wednesday to $6.16 a thousand cubic feet. And the market indicated prices were likely to remain high, as gas for delivery in November increased to $6.91.
Ironically, the natural gas industry is entering the heating season with plenty of gas in storage, largely because demand this summer was less than anticipated. There's about 3.2 trillion cubic feet of gas in storage, near record inventories and well above the target for the start of the heating season.
"It's not that we're running out of natural gas," said Blount.
But he said the gas that utilities put into storage cost an average of $5.80 per thousand cubic feet, less than today's spot prices but still 64 cents a thousand cubic feet more expensive than a year ago. The higher price is sure to be passed on to customers in most cases.
Also, demand this winter "is expected to increase across all sectors" from industrial uses and power plants to residential customers expected to be hit by a colder-than-normal winter, said Blount.
Meanwhile, Hurricane Ivan's impact in the Gulf of Mexico region has caused heating oil inventories to plummet from the upper half of the average range to the lower half as refiners were forced to shut down or curtail operation, according to the Energy Information Administration.
Distillate inventories, including both heating oil and diesel fuel, normally would be growing this time of year, but instead have fallen by 2.8 million barrels over the past two weeks, the EIA reported Wednesday.