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Natural gas prices seen rising 50 percent or more

WASHINGTON — Winter heating bills for people who use natural gas could be more than 50 percent higher this coming winter than last, according to an Energy Department forecast.

The department's Energy Information Administration said natural gas prices have doubled since last year because of a falloff in production, short supplies and high demand by industry and electric utilities.

And the agency in its short-term energy outlook report said that people -- mainly in the Northeast -- using oil for heating may be in for steep prices as well, perhaps a repeat of last winter.

Heating oil prices spiked to more than $2 a gallon in New England and some other parts of the Northeast last winter. The sudden increases were blamed on higher oil costs, low stocks and transportation problems.

"There is a risk of price spikes similar to last winter in the Northeast for heating oil as well as for diesel fuel if inventories are not built to adequate levels by the end of the year,'' the monthly outlook report said Monday. It said distillates -- heating oil and diesel fuel -- remain lower than normal as refineries have focused on pumping out gasoline.

People heating homes with natural gas -- especially in the Midwest, Ohio Valley and Northeast -- should brace themselves for higher heating costs, the report warned.

Spot wholesale prices for natural gas have doubled from a year ago, averaging between $3.50 and $4.50 per thousand cubic feet.

"We are projecting that natural gas price at the wellhead will increase by about 55 percent this winter (October-March) compared to last winter,'' said the report. Those price increases in all likelihood will be passed on to retail customers, it added.

A mild winter could result in prices easing, but severe weather could cause prices to go even higher, the report said.

It attributed the soaring prices to a shortage of supply and growing demand as industry and electric utilities shift more and more to cleaner burning natural gas.

Industrial demand for natural gas has increased nearly 10 percent this year, the report said. Natural gas demand also has been exacerbated by the hot weather this summer in parts of Texas and California, where utilities rely heavily on gas for electricity.

The American Gas Association reported that in the week ending July 28 there was 1,920 billion cubic feet of natural gas in storage, or 17 percent (386 billion cubic feet) less than at the same time a year ago. The 386 billion cubic feet is equivalent to about five days of total natural gas consumption in the United States.



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