Should You Fear Heating Prices This Winter?
NEW YORK ( MainStreet) As winter approaches, most consumers can expect to pay more to heat their homes.
Homes that use natural gas, propane and electricity as a source of heat should expect higher prices, said the Energy Information Administration. Still, home heating oil prices are expected to be cheaper than last winter.
Temperatures for this winter are close to what occurred last year, but the Northeast is projected to be about 3% colder while the West will be 3% warmer, the EIA said. The projected changes in residential expenditures from winter of 2012 are 13% higher for homes that heat primarily with natural gas, 9% higher for propane, 2% higher for electricity and 2% lower for heating oil.
One positive note for consumers is that natural gas prices are falling because of "continued efficiency gains through pad drilling," said Campbell Faulkner, quantitative analyst for OTC Global Holdings.
"Each marginal well drilled in the North American shale adds more gas while being cheaper to complete and more efficient to operate," he said. "This should continue to put pressure on gas especially as switching between coal and gas only allows gas to rise so far before the thermal spread of coal and its efficiency forces gas consumption to fall."
Gas prices through the end of 2013 will likely continue on its "sideways trend bearing any structural shifts in the power markets that are unforeseen," Faulkner said. He estimates that natural gas prices will range between $2.90 to $4.70 for 2014.
Whether natural gas prices have hit the bottom remains to be seen, said Peter Jucha, vice president of Clearview Energy, which serves customers in 13 states.
The mid Atlantic, Midwest and Texas markets are likely to see natural gas prices stabilize, he said.
The increases in gas reserves have contributed to the drop in prices and the increase in price stability, Jucha said. The discovery and the economic benefit of hydraulic fracturing and horizontal drilling of natural gas trapped in underground shale rock has led to shale gas fields being developed successfully in the U.S.
Natural gas prices could increase if colder temperatures persist throughout the winter months, increasing demand, said Chris Faulkner, CEO of Breitling Energy Companies, a Dallas oil and gas exploration and production company.
"In the near term I am still pretty bearish on natural gas prices," he said. "We may see a little tailwind in prices due to temporary supply disruptions, including flooding in Colorado and from the various outages we had at gas processing plants around the country. I think we should all realize $4.00 has become expensive gas in this market. On the bright side, we may see demand grow in the latter part of 2014."