Natural gas rises 40 percent - Price shock: Heating oil costs hit highest level on record Monday
www.pal-item.com Tuesday, February 25, 2003
Wholesale natural gas prices jumped nearly 40 percent and heating oil costs hit their highest level on record Monday, developments that point to increases in already bloated home-heating bills.
"I've never seen it this high," veteran oil dealer Blake Warfield of Richmond said. "It's been moving up little by little every day," Warfield said.
"And the cold weather compounds the problem."
Residential heating oil prices are up 50 percent from a year ago, when the average winter heating oil bill was $642, the U.S. Department of Energy says. Bills might approach $1,000 this winter.
Warfield Oil was charging $1.49 a gallon for oil this morning, the same as two weeks ago, but Warfield said he expects to increase prices this week to keep up with soaring wholesale costs.
A year ago heating oil was selling for $1.20 to $1.25 per gallon. In January 2001, oil was selling for 98.9 cents per gallon here.
Although natural gas prices are not as easy to track, consumers were reporting similar jumps before Monday's rise. The average household heating bill for natural gas users was $596 last winter.
"Higher natural gas and heating oil prices will cut more into consumer budgets," says Jim Williams of WTRG Economics, an energy consultant. "If you are old enough to remember, it is time to bring out that sweater that President Carter used to wear while encouraging us to turn our thermostats down."
In futures trading in New York, natural gas prices rose from $6.61 per million BTU to $9.14, the highest in more than two years. Heating oil hit $1.15 a gallon, surpassing the previous record high set in December 1979, before ending the day slightly lower.
Futures prices usually have an impact on retail prices later, and not necessarily by the same magnitude, but point to the direction of prices.
More than half of U.S. homes are heated with natural gas, while 8 percent are warmed with heating oil. Prices for electricity, which heats 30 percent of U.S. homes, also might rise, because natural gas and oil are among fuels used to produce it.
Richmond Power & Light fires its generators with coal.
The increased heating costs, which in part reflect higher demand during an especially cold winter in many parts of the country, act as a drag on the economy.
"We're in a weak recovery as it is, and this is just one more headwind in an economy that is facing many headwinds," says Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.
Forecasts for another mass of cold air to sweep through parts of the East Coast and the Midwest later this week led traders Monday to bid up prices. Energy prices were already on the rise because of a strike in Venezuela that has drained oil off the international market and concerns that a war with Iraq would choke off oil supplies.
In other energy news:
- Crude oil prices rose to $36.48 a barrel Monday, up 90 cents from Friday's close.
- After rising for 10 weeks, the average price of a gallon of gasoline in the United States last week was flat at $1.66, the highest price since June 2001.
Heating help Residents who fit income guidelines can apply at Community Action for heating assistance. Proof of income and utility bills are needed. Yearly maximum income for a household:
- One person: $11,075
- Two people: $14,925
- Three people: $18,775
- Four people: $22,625