Lower heating costs predicted

[November 13, 2008]  WASHINGTON (AP) -- The dramatic drop in world oil prices means a break this winter in heating costs, although households will still be paying more than they did last winter, the government says.

Gasoline prices, which have declined by nearly 50 percent since July, are expected to remain relatively low, averaging $2.37 a gallon through 2009, according to the Energy Department.

The department's Energy Information Administration revised its short-term energy outlook Wednesday to reflect the reduction by more than half of crude oil prices over five months. The revision also reflects expectations of a more severe economic downturn.

It said people using fuel oil -- about 8 million households, mostly in the Northeast -- are expected to pay on average $1,694 during this winter's heating season, a 13 percent increase over last winter. But that's nearly $700 less than what was projected by the agency only a month ago.

The 58 million households that heat by natural gas will pay only slightly more than last year -- an estimated $889 for the October through March heating season, an increase of 3.6 percent.

While natural gas often mirrors oil prices, some of the savings from declining wholesale gas prices will not be passed on to consumers because much of the gas they will use was bought by utilities last summer -- when prices were high -- and put into storage.

The EIA also cautioned that actual prices could vary from region to region and depending on how well a home is insulated.

Meanwhile, the agency projects gasoline prices to average $2.37 a gallon next year, compared with $2.22 a gallon last week and a national average high of $4.11 last July.

The world's economic troubles and the resulting decline in global energy demand has resulted in a "rapid and substantial reduction in crude oil and other energy prices," said the EIA. It predicted "as a result of worldwide economic stagnation oil markets are expected to remain weak" through next year.

The agency projected oil prices to average $63.50 a barrel in 2009.

Actual costs of both crude and refined products, including fuel oil and gasoline, may be even lower than projected in the EIA report. Both crude oil and natural gas have continued dramatic declines this week -- declines that may not have been taken into account in the report.

Oil prices for December delivery plunged to $56 a barrel Wednesday on the New York Mercantile Exchange. Wholesale natural gas prices tumbled 30 cents to $6.40 per thousand cubic feet Wednesday, also for December delivery. The EIA projected wholesale natural gas costing an average of $6.82 next year, $1.35 less than projected a month ago.

Residential fuel oil prices are expected to average $2.75 a gallon during the upcoming winter heating season, or 56 cents a gallon less than predicted a month ago, but still 17 percent higher than last winter. And retail natural gas prices are expected to be $12.72 a thousand cubic feet, or 30 cents less than estimated in early October and only slightly more than last winter.

The EIA said that future prices "will primarily depend on the magnitude and duration of the economic downturn" as well as the production policies of the OPEC oil cartel. It said its energy projections assume that OPEC production cuts "may limit, but not reverse, the recent sharp fall in oil prices."

"The condition of the global economy is expected to remain the most important factor driving world oil prices," according to the report.

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On the Net:

Energy Information Administration:
http://www.eia.doe.gov/

[Associated Press; By H. JOSEF HEBERT]

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