In its Winter Fuels Outlook for the coming winter (released Oct. 8), the Energy Information Administration (EIA) expects U.S. households to see little change in their home heating costs compared to last year. While it ultimately depends on the household’s region and chosen heating fuel, the EIA reports “retail energy prices in our forecast are less than they were last winter, but temperatures across much of the country are set to be colder this year, meaning homes will use more energy for space heating. The combination of lower prices and colder weather results in relatively little change in expenditures.”
In its analysis of propane consumption and pricing, the EIA reported the following:
“In our base case, we expect households heating primarily with propane will pay about the same amount as they did last winter on average across the United States. Propane is used as a heating fuel in 5% of U.S. households, mostly in rural areas.
"In our base case, we expect that homes in the Midwest will see propane expenditures increase by 2% from last winter, the greatest increase among the regions. The increase in spending by Midwest homes is driven by an 11% increase in consumption because of a return to more normal temperatures this winter after the very mild winter last year in the Midwest.
"The increase in consumption is partly offset by our expectation of 8% lower retail propane prices in the Midwest this winter. In the Northeast and the South, we expect households to spend about the same as last winter, as forecast increases in consumption are offset by lower prices.
"In the colder scenario, we forecast a 19% increase in household expenditures for propane this winter in the Midwest, a 13% increase in the Northeast, and a 7% increase in the South. In the warmer case, we forecast homes in all regions would spend about 8% less than the previous winter.
"Because propane can be produced from both crude oil and natural gas, propane prices typically follow the prices of crude oil and natural gas but can vary significantly depending on supply and demand conditions, particularly in response to winter weather. We expect the retail propane spot price will average $2.40 per gallon (gal) throughout the winter, 5% less than the previous winter.
"The Midwest often has lower retail prices than other regions, averaging $1.89/gal this winter. The Midwest has a network of propane distribution hubs throughout the region, making access to retail supply robust compared with other regions. Midwest propane inventories accounted for 26% U.S. propane inventories in 2023.
"We forecast U.S. propane production to increase by about 3% this winter compared with last winter. We expect U.S. propane consumption across all sectors to be up about 11% this winter compared to last winter because of increased propane use for space heating and for petrochemical production. In October and November in the United States, propane is consumed in commercial grain dryers when the corn harvest takes place, and we expect minimal grain drying demand for propane at the start of this winter.
"Propane inventories are seasonal. Inventories typically build from April to September, when propane consumption is relatively low, and fall during the winter. At the end of September, U.S. propane inventories totaled 100 million barrels, 9 million barrels above the previous five-year average. We forecast that U.S. propane inventories will remain well above their previous five-year average throughout the winter."
