Consumers can expect to pay more to heat their homes this winter compared to last year due to surging fuel costs and slightly colder temperatures, according to the Energy Information Administration.
In its 2022 Winter Fuels Outlook, EIA predicts the largest increase over last winter—28%—for homes that heat with natural gas, with average household expenditures at $931. Those costs are expected to average $1,359 (10% more than last winter) for households with electricity as their heating source, $2,354 (27% increase) for heating oil, and $1,513 (5% increase) for propane.
“Forecasting months-long weather and energy trends is not an exact science, but it's highly likely that global dynamics affecting energy commodities will lead to higher U.S. prices for heat this winter," said EIA Administrator Joe DeCarolis.
The Winter Fuels Outlook is a supplement to EIA's October Short-Term Energy Outlook that focuses on retail energy markets for the four most common U.S. heating fuels during the winter heating months (October to March). The agency uses National Oceanic and Atmospheric Administration forecasts to predict winter energy use.
EIA said residential costs will rise to 14.8 cents per kilowatt-hour of electricity, an 8% increase compared to last year, and about $15.95 per thousand cubic feet for natural gas, a 22.5% jump.
“Higher retail electricity prices largely reflect an increase in wholesale power prices, which are driven by higher natural gas prices," EIA said in its report. Wholesale prices at major power trading hubs “will be about 20-60% higher on average this winter."
Henry Hub natural gas spot prices continue to climb, the result of higher demand and lower supply. As the year enters the fourth quarter, EIA expects spot prices to average about $7.40 per million British thermal units (MMBtu) and then fall below $6.00/MMBtu in 2023 as U.S. natural gas production rises.
Overall, the benchmark Henry Hub price is expected to average $7.26/MMBtu this winter, a 54% surge from last winter. The Midwest will see the biggest jumps in residential prices for natural gas—averaging 27% higher than last winter—followed by increases of 23% in the West, 17% in the Northeast and 15% in the South.
“If spot prices continue to rise, retail prices this winter could be even higher than our forecast," the report said.