WASHINGTON - A prolonged recovery of oil and natural gas production in the Gulf of Mexico will continue to impact U.S. energy prices through mid-2006, according to the U.S. Department of Energy's (DOE's) Energy Information Administration (EIA).

The EIA's latest Short Term Energy Outlook states, "It now appears unlikely that anything close to complete recovery will occur before the end of the second quarter of 2006." The report projects a gradual increase of Gulf oil and natural gas production, reaching 87.4 percent and 79.4 percent of their pre-hurricane levels, respectively, by March 2006. As a result, the EIA expects supplies of gasoline and natural gas to remain tight at least through the winter.

Despite the grim production outlook, the EIA report revised slightly downward the cost of heating this winter, citing in part lower petroleum costs. The EIA now projects a 41 percent increase in winter heating costs for homes heated with natural gas, a 27 percent increase for homes using heating oil, and a 21 percent increase for homes using propane. Those numbers range from 5 to 9 percent lower than last month's projection.

Publication date: 11/14/2005