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Why your heating bill could skyrocket this winter: What to know about hikes in natural gas prices

·5 min read
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Break out the sweater. And maybe a blanket too.

You might want to keep the temperature turned down this winter. That's because heating bills are expected to soar after a spike in oil and natural gas prices amid the global economic recovery and a move away from fossil fuels toward renewables.

While oil, coal and natural gas might not be used forever, they're still crucial to the world's energy infrastructure for now. And prices of those commodities are poised to make it the most expensive winter in recent memory for Americans living in cold climates.

U.S. prices of natural gas are about three times higher than at this point in 2020. Prices have reached a 13-year high, according to the International Energy Agency, an organization that advises governments on energy policy

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That doesn't mean bills will go up threefold because the entire cost difference won't be passed along to consumers. But it does mean you might want to dress warmly around the house.

It's a sharp reversal from the last five years or so when an expansion of the fracking technique in shale oil fields led to ample natural gas and low heating bills.

"Nobody's been paying close attention to their natural gas heating bill," said Rob Thummel, an investment manager focusing on energy at Tortoise Capital. "In fact, in a lot of cases, your bills have been going down."

No more.

Here's what's happening with your heating bill:

How much will winter heating bills go up?

It depends on numerous factors, including the exact area where you live and the weather.

If it's a normal winter, the average customer's bill could increase by 50% to 75%, Thummel predicted.

A warmer-than-usual winter could limit bill increases to about 25%, he projected.

But if it's colder than normal? That's when things could get really pricey. He did not specify how much so.

"Globally, the key drivers of energy market dynamics over the coming months will be the severity of the Northern Hemisphere winter, the strength of economic growth trends and the magnitude of unplanned supply outages," the IEA reported.

Why is natural gas suddenly in short supply?

Well, natural gas has become increasingly popular in foreign countries in recent years as utilities and nations have turned to the commodity to replace coal.

While natural gas is still a carbon-emitting fossil fuel, it's cleaner than coal. The upshot is that natural gas can help nations meet their commitments to slashing greenhouse gas emissions, which cause climate change.

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Demand has been especially high in Europe and Asia, neither of which were major natural gas users until recently. Now that they're putting strain on the supply of the commodity, the price of the fuel, which is driven by the global market, has increased for Americans too.

Some countries are now turning back to coal in the short run amid the spike in natural gas prices. But that's leading to a spike in coal prices in a costly loop for consumers.

Are we going to run out of natural gas?

Not anytime soon. Thummel called the U.S. the Saudi Arabia of natural gas and estimated that the nation has a 100-year supply underground.

But what about the infrastructure needed to transport natural gas?

That's in short supply.

Basically, the U.S. doesn't have enough export facilities, pipelines and storage to quickly increase capacity, Thummel said.

What's more, he added, investors have rewarded energy companies in recent years for returning cash to shareholders rather than investing in new production.

This confluence of events is undermining access to the fuel used to run your furnace.

How is oil affecting heating bills?

Most Americans don't use oil to heat their homes, save for some in the Northeast. But those who do will feel the pain as well.

The U.S. price of oil has risen to more than $80 per barrel, up from the low $60s in September, amid increased global demand as the economy recovers during the pandemic.

Normally, that wouldn't be much of an issue as oil producers like the Organization of the Petroleum Exporting Countries and U.S. shale energy companies would simply add more equipment to extract more oil.

But energy companies have been rethinking whether they want to continue plowing money into fossil fuel production amid a political turn away from carbon-emitting energy.

So they are less likely to turn the spigots on this time around. For example, gas fields in the Groningen area of the Netherlands are being shut down in 2022, according to the IEA.

And Exxon is reportedly reconsidering major investments in natural gas projects, the Wall Street Journal reported Wednesday.

Meanwhile, consumers who do use heating oil are poised to pay more this winter, depending on where prices settle.

"Heating oil is basically diesel," said Patrick De Haan, head of petroleum analysis for fuel-savings app GasBuddy.

But the average price of diesel fuel has hit a seven-year high in recent weeks, just like the average price of gasoline, following the spike in oil prices.

"Anyone in the Northeast who still uses heating oil can expect a pretty pricey winter," De Haan said.

What can you do to save on your bill?

All is not lost. There are ways to reduce your bill if you need to save.

  • Check and replace your furnace air filter often.

  • Run the fan system on your furnace 24/7

  • Close the vents in areas of the house you're not using.

  • Get a humidifier, which will make it feel warmer.

  • Consider adding insulation to the attic.

  • Check for air leakage around windows. Consider caulking and weather stripping.

  • Get a programmable thermostat

  • A programmable thermostat allows you to preset times for the furnace to turn on and off throughout the day.

Contributing: Cheryl V. Jackson

You can follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey and subscribe to our free Daily Money newsletter here for personal finance tips and business news every Monday through Friday morning.

This article originally appeared on USA TODAY: Heating bills set to soar this winter as natural gas prices skyrocket

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