With oil prices rising, and temperatures expected to be colder, consumers will pay more to heat their homes this winter
With winter temperatures expected to return to normal following last year’s mild season, Massachusetts residents who warm their homes with oil can expect to spend a record amount in the next six months, according to a forecast released by the federal government Wednesday.
The combination of high prices — averaging $3.80 a gallon this season — and colder weather will drive fuel bills for heating oil consumers to around $2,500, on average, this winter, according to the US Energy Information Administration. That’s more than any previous winter on record, and roughly $400 more than consumers spent last season.
But many Massachusetts residents use natural gas for heat and they can expect a moderate bill this winter — around $1,010 on average, as prices hover near 10-year lows. The past few winters, bills for natural gas customers in the Northeast have averaged $1,136.“The big story this winter is that the weather forecast has returned to the normal cold from the record warm winter in many areas last year,” said Tancred Lidderdale, a senior economist with the Energy Information Administration. “So when we’re talking about household expenditures [rising] this winter, weather trumps prices in the forecast.”
Natural gas prices continue to plummet — 16 percent less than they were five years ago — as new sources of the fuel have flooded the United States. That, coupled with more efficient heating systems, has meant moderate heating bills even in colder weather.
Heating oil, meanwhile, is going in the opposite direction. A survey by the Massachusetts government shows heating oil averaging $3.90 a gallon, up 26 cents from the same time last year. And prices for crude oil closed Wednesday at $91.25 a barrel in New York, up from around $86 a year ago.
The crude costs have risen for several reasons: continuing unrest in the Middle East, the recession in the eurozone, and the closing of several refineries that supply the Northeast, said Chris Lafakis, a senior economist covering energy markets for Moody’s Analytics .
“Crude oil prices have never been higher at this time of year than they currently are,” Lafakis said.
The rising heating oil prices worry John J. Drew, president of Action for Boston Community Development Inc., an agency that funnels state and federal heating assistance to needy families in Boston, Brookline, and Newton. That’s because recent federal and state budget cuts have meant less aid available through the Low Income Home Energy Assistance Program, or LIHEAP. The program’s funding has declined by about 30 percent, from $5.1 billion in 2010 to $3.47 billion last winter.
This season, the poorest families in Massachusetts may receive up to $750 for heating bills — about $350 less than they would have gotten last year.
“We’ve got more coming to us than last year, and we’ve got more people in need,” said Drew, who said his agency has already received about 10,000 aid applications. Last year, roughly 200,000 Massachusetts households qualified for aid.
On Wednesday, US Representative Edward J. Markey, a Malden Democrat and longtime heating assistance advocate, said he and several other lawmakers plan to continue pressing federal health officials to restore LIHEAP funding. Earlier this year, they asked that the program be given $4.7 billion to distribute.
“Record-high home heating costs are a chilling proposition for New England families this winter,” Markey said in a statement. “This LIHEAP funding will help families stay warm and make ends meet during these tough economic times.”
Heating oil dealers are bracing for a colder winter after the mild weather last winter cut demand by as much as 35 percent.
“The [price] unpredictability is certainly a concern,” said Michael Ferrante, president of the Massachusetts Oilheat Council, a trade group that represents about 350 heating oil dealers. “The way our dealers try to ease that concern and that budgetary pain is to put their customers on a budget . . . and by encouraging changing out inefficient systems.”