Winter heating bills loom as next inflation threat
With consumers already dealing with the fastest price increases in decades, another unwelcome uptick is on the horizon: a widely expected increase in winter heating bills.
After plunging during the pandemic as the global economy slowed, energy prices have roared upward. Natural gas, used to heat almost half of U.S. households, has almost doubled in price since this time last year. The price of crude oil — which deeply affects the 10% of households that rely on heating oil and propane during the winter — has soared by similarly eye-popping levels.
And those costs are being quickly passed through to consumers, who have become accustomed to cheaper energy prices in recent years and now find themselves with growing concerns about inflation this year.
In the United States, the winter months account for about 50%80% of residential fuel consumption. And there is “a significant chance” consumers could face a “marked increase” in prices for heating, said Nina Fahy, an analyst for Energy Aspects, a research consultancy.
Last winter was warmer than average, which led to residential energy bills that were comparatively low. This season, heating costs could rise to levels not seen for a decade, even if there isn’t a severe winter. Several factors — lower global fuel inventories, incentives for producers to let prices rise and a mismatch between supply and demand as economies emerge from the pandemic — may combine to push bills higher regardless.
Mark Wolfe, executive director of the National Energy Assistance Directors’ Association, a group of state officials administering aid to low-income households, says those living paycheck to paycheck, or just trying to save, aren’t going to be soothed by complex explanations about inventory levels, supply chains or global demand. When the bills start coming in December or January, he said, “the public’s going to get angry.”
Expert forecasts suggest that the southern half of the country, which has milder winters and relies on relatively cheap electricity for home heating, may enter spring largely unscathed. But the Northeast and the Northern Plains, as well as rural areas nationwide, are far more dependent on heating oil and propane, which are highly exposed to price spikes in commodity markets.
Reflecting the particular concern in their region, a bipartisan group of senators from New England — led by Susan Collins, R-maine, and Jack Reed, D-R.I. — sent a letter to the White House last week urging “targeted actions” to provide relief “given the current state of energy markets.”
Last week, the Biden administration released 90% of the $3.75 billion in funds dedicated to the Low Income Home Energy Assistance Program, which provided an average of $439 to more than 5 million families the year before the pandemic. It received $4.5 billion in additional emergency grants this year. Usually, funding for the program isn’t released until all budget items for the fiscal year are approved, but Congress recently made an exception as cold months approached and sparring over spending bills continued.