Winter Heating bills loom as the next inflation thread

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 percent 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 to 80 percent 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.

Last week, the Biden administration released 90 percent 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 five 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.

Mr. Wolfe’s group has urged Congress to include $5 billion more for the program in the
social safety net package being negotiated in Washington.

The increase in home heating costs is sure to hover over economic debates in
Washington about inflation. White House allies, fighting to push through the president’s
sweeping agenda, assert that the current surge in consumer prices mostly reflects
pandemic disruptions that will dissipate next year. Federal Reserve officials, who have
been trying to put in place a policy framework less keenly sensitive to inflation, will be
pushed to gauge whether that contention is well founded.

The latest outlook from the National Oceanic and Atmospheric Administration suggests
a decent chance of a milder-than-average winter. But according to projections by the
U.S. Energy Information Administration, if winter is somewhat colder than usual,
energy bills could rise 15 percent for households heated by electricity, 50 percent for
those depending on natural gas and 59 percent for those that mostly use heating oil.
Propane users would be in for the biggest blow — a 94 percent increase, or potentially
hundreds of dollars over the six-month heating season.

As with other price shocks stemming from the pandemic, the pain will be particularly
acute for those of limited means. Twenty-nine percent of those surveyed by the Census
Bureau have reported reducing or forgoing household expenses to pay an energy bill in
the last year.

By Talmon Joseph Smith

By The New York Times
Nov. 8, 2021