Heating bills set to soar as inflation hits energy prices

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Get ready to pay sharply higher bills for heating this winter, along with seemingly everything else.

With prices surging worldwide for heating oil, natural gas and other fuels, the U.S. government said Wednesday it expects households to see jumps of up to 54% for their heating bills compared to last winter.

The sharpest increases are likely for homes that use propane, but others are also likely to see big increases. Homes that use natural gas, which make up nearly half of all U.S. households, may spend $746 this winter, 30% more than a year ago. Homes using heating oil could see a 43% increase, and those heated by electricity could see a more modest 6% increase.

This winter is forecast to be colder across the country than last year. That means people will likely be burning even more fuel to keep warm, on top of paying more for each bit of it.

The forecast from the U.S. Energy Information Administration is the latest reminder of the higher inflation ripping across the global economy. Earlier in the morning, the government released a separate report showing that prices were 5.4% higher for U.S. consumers in September than a year ago. That’s the hottest inflation since 2008, as a reawakening economy and snarled supply chains push up prices for everything from cars to groceries.

The biggest reason for this winter's higher heating bills is the recent surge in prices for energy commodities after they dropped to multi-year lows in 2020.

Natural gas in the United States, for example, has climbed to its highest price since 2014 and is up roughly 90% over the last year. The wholesale price of heating oil, meanwhile, has more than doubled in the last 12 months.

A big reason is how the economy has roared back to life following shutdowns caused by the coronavirus, as well as how global the market for fuels has become. In Europe strong demand and limited supplies have sent natural gas prices up nearly 350% this year. That’s pushing some of the natural gas produced in the United States to head for ships bound for other countries, adding upward pressure on domestic prices as well.

The amount of natural gas in storage inventories across the northern hemisphere is relatively low, according to Barclays analyst Amarpreet Singh, which means there is less of a cushion heading into winter heating season.