Home Heating Costs Soar

Thanks to Hurricanes Katrina and Rita, continued tensions in the Middle East, ever-increasing global demand and other factors, oil prices have soared in 2005. Crude recently traded at around $65 a barrel, up from a high of $55 in 2004 and just $15.56 in 1999. Natural gas, meanwhile, recently fetched more than $12 per million British thermal units, up from less than $8 a year ago.

Drivers were the first to feel Katrina's wrath. Gasoline hit a high of $3.06 nationally in the days immediately following the storm. It has since dipped to around $2.80.

But the respite will be short-lived. In just a few weeks, as the temperatures start to drop, many consumers will be confronted with home-heating bills much higher than they were just a year ago.

Homeowners in the Northeast are in for some pain. According to the U.S. Energy Information Administration (EIA), heating oil, on average, is expected to cost $2.40 per gallon this winter, up from $1.83 last winter. A typical homeowner in the Northeast — where two thirds of oil-heated homes are located — can expect to spend $1,675 this winter season, a 31% increase over last year. This figure is based on the government's assumption that homeowners this year will consume 698 gallons, the same amount as last year.

Homeowners who use natural gas will be spending more, too. The EIA says prices will average $16.23 per thousand cubic feet, a 46% increase over last year. The average Midwestern household — where the majority of natural-gas customers reside — are expected to use 91,000 cubic feet this winter and pay a total of around $1,480.

And these estimates might prove conservative. The EIA could raise its heating cost forecast after it has a chance to take the effects of Hurricane Rita into account, says Neil Gamson, an economist with the EIA. (The EIA's next price forecast is due on Oct. 12.) A particularly cold winter could also send prices higher, says Gamson.

For ways to cut your home heating costs, see our stories, "Save Hundreds on Your Heating Bill" and "Is It Time for a Pellet Stove?"