EIA predicts oilheat homes to pay less for heat this winter
Prediction backed-up by both US and Global
On October 7, the National Association of State Energy Officials, in partnership with the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability and the U.S. Energy Information Administration (EIA), convened the 2014-2015 Winter Energy Outlook Conference in Washington, D.C
This year’s conference included a presentation on EIA’s 2014 Winter Fuels Outlook as well as panel discussions with well-known industry representatives and energy experts about factors likely to affect energy markets this winter in the United States and globally.
The EIA projected a decline in heating costs for consumers. With lower consumption anticipated and retail price projections showing a reduction, homeowners using heating oil will spend 15% ($362) less, on average, than last year if long-term weather forecasts hold. If temperatures are as little as 10% warmer than anticipated, the savings may be as high as 24%.
This analysis was supported by Seth Kleinman, Global Head of Energy Strategy, Citi Group, who highlighted various worldwide and domestic forces that should continue keep oil prices down:
- Pipeline and other infrastructure developments in the U.S. has led to downward pressures on pricing for U.S. produced oil. Additionally, the amount of shale oil entering the market is affecting international markets.
- The geopolitical pricing premium for crude oil appears to be shrinking as speculators have been liquidating their positions and the amount of oil traded by speculators on ICE Brent is down 75 percent from its peak
- At the same time the supply situation is looking positive, the demand side of the equation also points to lower prices. Mr. Kleinman indicated that Citi economists continue to forecast tepid global GDP growth in 2015 with only pockets of outperformance here and there. August revisions cut the 2014 outlook by 10 basis points to 2.8% and trimmed 2015 global growth estimates to 3.4% from 3.5%. Japan and Europe are likely to expand quantitative easing programs later this year but with negative real rates and sluggish inflation expectations, growth is expected to keep struggling in these major economies in the coming year.
- Additionally, there are a number of new refineries coming online in the Middle East, south Asia and the former Soviet Union, which will continue to put pressure on refinery margins.
The continued downward movement of heating oil prices in recent weeks supports Mr. Kleinman’s remarks.
At the same meeting, John Huber, President of National Oiheat Research Alliance, described the efforts of the heating oil industry to improve its product. He reported on the efforts of the Northeastern states to move to a low-sulfur heating oil product which improves efficiency and dramatically reduces emissions. He said that this step would also lead to long-term improvements in heating equipment as it is offered to consumers.
Additionally, Mr. Huber described the efforts of the Oilheating industry to move to ever-increasing blends of heating oil and renewable biodiesel. These steps will reduced greenhouse gas emissions and position the industry to be a long-term solution as a renewable fuel for millions of American customers.
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