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Watch now: Heating bills set to soar as inflation hits energy prices

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Energy Costs Winter Outlook

Rows of homes in suburban Salt Lake City are shown. With prices surging worldwide for heating oil, natural gas and other fuels, the U.S. government said Wednesday it expects households to see jumps of up to 54% for their heating bills compared to last winter. 

During the height of the COVID-19 pandemic in the spring of 2020, energy costs hit all-time lows as roads and airports were nearly deserted.

NEW YORK — Get ready to pay sharply higher bills for heating this winter, along with seemingly everything else.

With prices surging worldwide for heating oil, natural gas and other fuels, the U.S. government said it expects households to see their heating bills jump as much as 54% compared to last winter.

Nearly half the homes in the U.S. use natural gas for heat, and they could pay an average $746 this winter, 30% more than a year ago. Those in the Midwest could get particularly pinched, with bills up an estimated 49%, and this could be the most expensive winter for natural-gas heated homes since 2008-2009.

The second-most used heating source for homes is electricity, making up 41% of the country, and those households could see a more modest 6% increase to $1,268. Homes using heating oil, which make up 4% of the country, could see a 43% increase — more than $500 — to $1,734. The sharpest increases are likely for homes that use propane, which account for 5% of U.S. households.

This winter is forecast to be slightly colder across the country than last year. That means people will likely be burning more fuel to keep warm, on top of paying more for each bit of it. If the winter ends up being even colder than forecast, heating bills could be higher than estimated, and vice-versa.

U.S. consumer prices increased solidly in September and are poised to rise further in the months ahead amid a surge in the costs of energy products, which casts doubt on the Federal Reserve's view that high inflation is transitory. Conway G. Gittens looks at the price spike.

The forecast from the U.S. Energy Information Administration is the latest reminder of the higher inflation ripping across the global economy. Earlier Wednesday, the government released a separate report showing that prices were 5.4% higher for U.S. consumers in September than a year ago. That’s the hottest inflation since 2008, as a reawakening economy and snarled supply chains push up prices for everything from cars to groceries.

The higher prices hit everyone, with pay raises for most workers so far failing to keep up with inflation. But they hurt low-income households in particular.

“After the beating that people have taken in the pandemic, it’s like: What’s next?” said Carol Hardison, chief executive officer at Crisis Assistance Ministry, which helps people in Charlotte, North Carolina, who are facing financial hardship.

She said households coming in for assistance recently have had unpaid bills that are roughly twice as big as they were before the pandemic. They’re contending with more expensive housing, higher medical bills and sometimes a reduction in their hours worked.

“It’s what we know about this pandemic: It’s hit the same people that were already struggling with wages not keeping up with the cost of living,” she said.

'Significant hardship'

Nearly 22% of Americans had to reduce or forego expenses for basic necessities, such as medicine or food, to pay an energy bill in at least one of the last 12 months, according to a September survey by the U.S. Census Bureau.

“This is going to create significant hardship for people in the bottom third of the country,” said Mark Wolfe, executive director of the National Energy Assistance Directors’ Association. “You can tell them to cut back and try to turn down the heat at night, but many low-income families already do that. Energy was already unaffordable to them.”

Many of those families are just now getting through a hot summer where they faced high air-conditioning bills.

Congress apportions some money to energy assistance programs for low-income households, but directors of those programs are now watching their purchasing power shrink as fuel costs keep climbing, Wolfe said.

Tara Murray, executive director at the Empowerment Opportunity Center, said she knows people in Macon County are going to face the same difficulties as others will nationwide.

She said the center offers the Low Income Home Energy Assistance Program, which helps low-income households pay for home energy services during the winter season.

“We basically administer a state program that puts an individual’s information into a system and it generates what their benefit will be on their utility bill,” Murray said. “We don’t determine how much money they’re going to get on their utility bill but for this year, the state did increase the benefit amount.”

People with a household income that does not exceed an amount determined annually by the Illinois Department of Commerce are eligible, and Murray said they should apply soon instead of waiting for a shutoff notice.

Even if someone were to receive more than what is on their bill’s balance, Murray said, the funds will then be transferred onto their account as credit for the next billing cycle.

“Whatever your calculated benefit will be for this year is what it will be so it’s not going to be different if you wait,” Murray said. “This can help people make it through the winter.”

Murray said the center also provides a weatherization program for homeowners that can help insulate walls and attics, replace or repair windows and doors, and air seal gaps through their house.

With the waitlist being two years, Murray said, there are only a limited number of spots available for people to sign-up.

Murray said the center also provides a weatherization program for homeowners that can help insulate walls and attics, replace or repair windows and doors, and air seal gaps through their house.

With the waitlist being two years, Murray said there are only a limited number of spots available for people to sign-up.

The center also offers advice on the importance of weather strips to insulate doorways and windows, how the use of LED bulbs to lessen the impact on energy bills and other good practices like appropriate times to turn off furnaces or heaters.

What's causing this? 

The biggest reason for this winter's higher heating bills is the recent surge in prices for energy commodities after they dropped to multi-year lows in 2020. Demand has simply grown faster than production as the economy roars back to life following shutdowns caused by the coronavirus.

Natural gas in the United States, for example, has climbed to its highest price since 2014 and is up roughly 90% over the last year. The wholesale price of heating oil, meanwhile, has more than doubled in the last 12 months.

Another reason for the rise is how global the market for fuels has become. In Europe, strong demand and limited supplies have sent natural gas prices up more than 350% this year. That’s pushing some of the natural gas produced in the United States to head for ships bound for other countries, adding upward pressure on domestic prices as well.

The amount of natural gas in storage inventories across the northern hemisphere is relatively low, according to Barclays analyst Amarpreet Singh. That means there's less of a cushion heading into winter heating season.

Heating oil prices, meanwhile, are tied closely to the price of crude oil, which has climbed more than 60% this year. Homes affected by those increases are primarily in the Northeast, where the percentage of homes using heating oil has dropped to 18% from 27% over the past decade.



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