EIA predicts slightly cheaper oil heating costs

By Max Heuer

WASHINGTON, Nov. 13, 2002--The cost of heating a home this winter won't be quite as expensive as originally expected, but there will still be a much heavier financial burden than last winter on New Hampshire residents and others throughout the Northeast, the Energy Information Administration said in its November Short-Term Energy Outlook.

The EIA-part of the U.S. Department of Energy-last week lowered its estimated average household winter expenditure for oil heat by about $30, crediting the adjustment to a surprising jump in oil production from the Organization of the Petroleum Exporting Countries (OPEC).

EIA energy information specialist Jonathan Cogan said the production increase has made crude oil cheaper. This should in turn bring some moderate relief to oil heat customers in the Northeast, the EIA estimated.

"There has been talk of concerns in the market about possible military actions in the Middle East," Cogan said in a phone interview Wednesday. "The more fundamental factors of supply and demand seem to be more significant."

Oil heat customers make up 58 percent of New Hampshire's home heating market, according to the EIA, and natural gas users represent another 18 percent.

The EIA projection this month foresees expenditure increases over last winter of 40 percent in heating oil and 25 percent in natural gas. of

Last winter, the average Northeast customer paid $643 in oil heating during an unusually warm winter. This year, the EIA now estimates, it will cost the average homeowner $901. But that number is down from a $934 estimate in the Short-Term Outlook published last month. This year's estimates, despite being vastly higher than last winter, are not record breaking: two winters ago the average Northeast customer paid $999.

While the estimated decrease is "a step in the right direction" the cost is still going to be a "huge bite" out of homeowners' wallets, said Joe Broyles, energy program manager in the New Hampshire Governor's Office of Energy and Community Services.

New Hampshire has the lowest heating oil prices in New England, with an average of approximately $1.20 per gallon of oil, according to the most recent EIA weekly report.
But the price of oil heat in the Granite State has been increasing faster than the New England average, which is currently at about $1.25. The average price of a gallon of oil has climbed 2.1 cents since the first week in October in New Hampshire, one cent more than the New England average has risen.

The price of oil by the gallon in neighboring Vermont climbed just seven-tenths of a cent in the same period. Only Maine saw a larger increase, with its average increasing 3.9 cents.

Both Cogan and Broyles stressed that the accuracy of the estimates depends on the severity of this winter's weather.

"We have observed in October it was colder than we expected, but the rest of the forecast assumes we'll see so-called normal weather," Cogan said.

There is speculation that OPEC, in increasing its production, was motivated by the struggling world economy, which had driven down the number of consumers able to buy oil at exceedingly high prices, Broyles said. Other reports have hinted that some OPEC member countries could be cheating on their production quotas to produce more immediate cash.

"Nobody's really sure, but worldwide there is a lot of crude oil out there," Broyles said.

Published in The Manchester Union Leader, in New Hampshire.