Report Projects Increase in Winter Heating Oil Costs

By Michael Melia
States News Service
October 7, 2002

WASHINGTON -- The winter forecast for Maine grew bleaker as heating oil customers could see a price increase of as much as 45 percent due to the combination of greater demand caused by colder weather and higher prices for crude oil, according to a report by the Energy Department.

Residents of the Northeast can expect higher heating prices this winter that could range from $100 to $300 per household above last year's costs, according to the winter fuels outlook released by the Energy Information Administration at a conference it co-sponsored with the National Association of State Energy Officials.

The figures are based on the assumption of normal winter weather. Last year heating oil prices were significantly lower due to the warmest winter on record. This winter above normal temperatures are predicted for the Northeast due to El Nino, according to the National Oceanic and Atmospheric Administration, which oversees the National Weather Service.

The report projected heating oil demand to increase 19 percent from last year.

The average price per gallon of heating oil forecast for this winter is $1.35, compared to $1.10 of last winter, and nearing the $1.37 mark reached in the 2000-2001 winter.

According to the report's numbers, at $1.35 per gallon and with an average consumption of 692 gallons, the average Northeast household will pay $912 for heating oil this winter.

"We are looking at higher prices mainly driven by crude oil," EIA administrator Guy Caruso said at the conference.

Crude oil prices are expected to remain around $30 per barrel through the winter season, compared to $20 per barrel last year, due to a decline in world oil inventories and uncertainty about war with Iraq.

"Any price increase of crude translates quickly into a price increase of product," said Diane Duval, director of policy for the Northeast-Midwest Institute.

"Over all there is no cause for alarm at this point," said Duval in response to the outlook.

"What makes me concerned is the impact any military strike would have on the oil markets heading into winter."

In the event Iraq oil exports are limited by military action, Caruso said he is "encouraged by the availability of other supplies."

This news comes as Maine's funding from the Low Income Home Energy Assistance Program (LIHEAP), which helped roughly 46,000 Maine families last year, faces possible cuts.

President Bush requested a budget cut of the program by 18 percent nationally, reducing funding from $1.7 billion to $1.4 billion.

"The EIA projection strongly suggests funding for LIHEAP is not going to be sufficient," said Mark Wolfe, executive director of the National Energy Assistance Director's Association.

Congress has not completed work on the final appropriations for LIHEAP for the fiscal year 2003.

If the heating oil costs increase as projected, the purchasing power of any funding will decline.

"If Congress approves the President's request there will be wide spread significant hardships for Maine," said Wolfe.

Republican Sens. Olympia J. Snowe and Susan M. Collins oppose the President's request and joined 39 senators and 74 members of the House in a letter sent to Bush last month urging the release of $200 million dollars from the LIHEAP emergency fund.

"The possibility of substantial hikes is troubling, and it makes LIHEAP more important than ever," said Doug Dunbar, a spokesman for Rep. John Baldacci, D-Bangor.

"People need to know the money will be there," said Dave Lackey, spokesman for Sen. Snowe.