Americans to face higher heating costs

Friday, August 25th 2000, 12:00 am
By: News On 6

CHICAGO – Already walloped by a rise in gasoline costs this year, American consumers are now about to face much steeper home heating bills with natural gas and heating oil prices near historic highs.

Energy markets have been jolted this week by a combination of developments that sent prices shooting higher – an unexpected drop in U.S. crude oil stockpiles coupled with a pipeline explosion in New Mexico and a hurricane that raised fears of another blow to already low natural gas supplies.

Soon the aftershocks will be felt nationwide by consumers, whose utilities were already warning them to brace for big bills ahead.

Suzanne deGraff, a natural gas customer from Rochester, N.Y., said she's been told her monthly bill from Rochester Gas and Electric Co. will jump about $26 to $130.

"I'm not happy," she said, "but, again, they're the only ones in town. What am I going to do?"

Whether a customer's utility provides natural gas or heating oil, there appears to be no way around prices heading higher than last winter – one of the costliest home heating seasons ever.

Home heating oil prices surged Wednesday to their highest level since the Persian Gulf War in the wake of industry surveys showing inventories of U.S. crude oil, its source, dropping to 24-year lows. Energy prices retreated slightly Thursday on the New York Mercantile Exchange, but heating oil remains more than 50 percent more expensive than a year ago.

The increase is blamed partly on the Organization of the Petroleum Exporting Countries and its decision to cut back production last year after prices swooned.

Natural gas has rocketed upward for different reasons.

U.S. supplies of natural gas have been declining since the mid-1990s amid a falloff in production by energy firms that didn't find it worth their while when prices were low.

Prices are no longer cheap: They've more than doubled in the last year and a half and reached an all-time high of $4.85 per 1,000 cubic feet this week on the New York Merc, where futures prices are a precursor for wholesale and retail trends.

Making matters worse, production hasn't been revved back up, rising just 1 percent this year. And demand is up sharply in a booming economy that has more Americans plugging into computers and industrial use surging. The nation depends increasingly on natural gas to generate electricity as utilities gradually switch from coal and nuclear-powered plants.