We expect more US households to spend more on energy this winter than last winter, according to our latest Winter Fuels Outlook (released October 2022). We predict an increase in household energy consumption this winter because we expect higher electricity prices and a slightly colder winter.
We release ours Winter Fuels Outlook every October as part of our A short time to check the power (STEO). I Winter Fuels Outlook focuses on energy markets for the most common heating fuels in the US, and includes our forecast for winter (October to March) residential energy consumption. The consumption estimate reflects all energy consumption in the dwelling, not just heating the house.
Nearly 90% of US homes are heated primarily by natural gas or electricity. On average, we expect wholesale natural gas prices to be higher this winter than last winter, leading to higher retail prices for both natural gas and electricity this winter. Natural gas is the most widely used source of electricity in the United States.
Changes in wholesale heating oil and propane prices pass through retail prices more quickly than changes in wholesale natural gas or electricity prices. We expect heating oil prices to reach 19% higher than last winter, reflecting price pressure in the distillate oil market: low inventory, low imports, and limited refining capacity. Unlike other fuels, we expect propane prices to drop slightly, by 2%, this winter.
We base our weather forecast on our own Winter Fuels Outlook The National Oceanic and Atmospheric Administration expects a slightly colder winter than last winter and the average for the previous 10 years. Colder weather contributes to our expectation of higher energy consumption across all fuels and regions.
Inventories across the range of heating fuels are low, leading to high price volatility and inflation, especially if this winter is going to be very cold. Because climate conditions are the main source of uncertainty in these forecasts, our model includes two alternative winter weather scenarios that assume warm or cold winter weather.
More information is available in our article Winter Fuels Outlook, which will be updated every month this winter at the same time as the monthly STEO release. You can register to attend our presentation on Thursday, October 13, at 10:00 am eastern time.
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