WASHINGTON - Heating fuel inventory levels are currently on track to reach normal or near-normal levels by the end of October, according to projections released by the Department of Energy's (DOE's) Energy Information Administration (EIA). But a colder-than-normal winter could drive prices sharply higher.

According to the EIA, natural gas storage, which finished the last winter season at record lows, has recovered to about normal at the outset of this season. Distillate and propane inventories are within their normal ranges.

However, the U.S. oil and natural gas markets remain tight, as indicated by relatively high prices for crude oil and natural gas, low domestic stocks of crude oil, and relatively low petroleum stocks throughout the industrialized nations. Because of the general tightness of the domestic oil and natural gas markets, which is likely to continue throughout the winter, there could be strong upward price increases for heating fuels if winter temperatures fall well below normal.

One factor that could reduce upward pressure on fuel prices is that overall demand for heating fuels is expected to decline this winter compared to last winter under the assumption of normal weather. Nationally, heating degree days are projected to be 3 percent lower compared to last winter if normal weather conditions prevail.

With normal weather, winter heating fuel expenditures for households are expected to be:

About 8 percent lower than last winter for homes using heating oil;

Approximately 5 percent higher for natural gas-heated homes; and

About 3 percent lower for homes using propane.

Under a colder-than-normal winter scenario, heating fuel prices could be substantially higher. If heating degree days are 10 percent higher than normal, household heating expenditures would exceed the normal case by:

17 percent for heating oil;

16 percent for natural gas; and

19 percent for propane.

Publication date: 10/13/2003