Household energy prices will increase broadly this winter on expectations of higher retail energy prices and a slightly colder winter, according to the latest short-term forecast from the Department of Energy’s Energy Information Administration (EIA).
Retail heating oil prices will be 19 percent higher than last winter, reflecting price pressures in the distillate fuel oil market: low inventories, low imports, and limited refining capacity, the EIA said in its Winter Fuels Outlook, which is part of its Short-Term Energy Outlook (STEO). Natural gas prices are expected to be 21 percent higher than last winter, but propane prices are forecast to fall by 2 percent this winter, according to the EIA. The Winter Fuels Outlook reflects consumption across all residential energy uses, not just home heating.
Changes in wholesale heating oil and propane prices pass through to retail prices much more quickly than changes in wholesale natural gas or electricity prices, the EIA said.
With almost 90 percent of U.S. homes heated primarily by natural gas or electricity and with higher expected wholesale prices for natural gas this winter, the EIA forecasts higher retail prices for both natural gas and electricity this winter.
The EIA is forecasting Henry Hub natural gas spot price to average about $7.40 per million British thermal units (MMBtu) in the fourth quarter and then fall below $6.00/MMBtu in 2023 as gas production rises.
Natural gas consumption, on the other hand, will average 87.9 billion cubic feet per day (Bcf/d) in 2022, up 3.9 Bcf/d from 2021, reflecting more consumption across almost all sectors, the EIA said. The agency sees natural gas consumption falling by 2.6 Bcf/d in the 2023 because of lower consumption in the electric power and industrial sectors.
The EIA also forecasts a rise in electricity sales of 2.7 percent in 2022, mostly as a result of higher economic activity but also because of slightly hotter summer weather than last year. The agency sees electricity sales falling by 0.9 percent in 2023.
Meanwhile, wholesale electricity prices will be about 20 to 60 percent higher on average this winter with the largest increases likely in New England because of possible natural gas pipeline constraints, reduced fuel inventories for power generation, and uncertainty regarding liquefied natural gas shipments given the tight global supply conditions, the EIA said.
On the residential side, the EIA expects electricity will average 14.9 cents per kilowatt hour in 2022, up 8 percent from 2021, reflecting the expected increase in wholesale power prices driven by higher natural gas prices.
Natural gas will fuel 38 percent of electricity generation in 2022, up from 37 percent in 2021, but will fall to 36 percent in 2023, the EIA forecasts.
Electric generation fired by coal is expected to continue to fall, from 23 percent last year to 20 percent in 2022 and 19 percent in 2023 because of the expected retirement of some coal-fired capacity, the EIA forecasts.
Renewable generation sources, meanwhile, continue to gain ground, providing 22 percent of generation in 2022 and 24 percent in 2023, up from 20 percent in 2021, the EIA said.