Heating Fuels Forecast Indicates High Gas Prices, Lower Oil Prices in a Season With 'Normal' Weather

November 26, 2003…Hauppauge, NY…Customers can expect to pay slightly less this winter heating season for home heating oil in the New York region and on Long Island, but will face record high prices for natural gas as the 2003-2004 heating season begins, according to testimony provided Thursday to the Consumer Affairs Committee of the Suffolk County Legislature by Kevin Rooney, Chief Executive Officer of the Oil Heat Institute of Long Island.

Hauppauge, NY (PRWEB) November 28, 2003 --Customers can expect to pay slightly less this winter heating season for home heating oil in the New York region and on Long Island, but will face record high prices for natural gas as the 2003-2004 heating season begins, according to testimony provided Thursday to the Consumer Affairs Committee of the Suffolk County Legislature by Kevin Rooney, Chief Executive Officer of the Oil Heat Institute of Long Island.

Rooney, an expert on heating fuel issues who appeared at the request of the committee to deliver his annual forecast, has served as Assistant Secretary at the U.S Department of Energy, and director of public affairs for the Long Island Lighting Company. Representatives of the natural gas heating industry did not appear before the committee.

Natural gas customers are likely to experience equal or higher prices compared to last season due to higher gas commodity prices that have in part been driven up by lower inventory levels and higher-prices for product purchased in the summer and fall for inventory stocks, said Rooney. Though indications are that adequate inventory stocks of reasonably priced home heating oil will keep prices steady, OPEC has stated that it plans to cut its production by some 900,000 barrels of crude oil per day. When supplies are cut, and inventories drop, prices can rise.

"Prices are affected by several key factors, beginning with the weather, which impacts demand. In turn, demand impacts inventory supply levels, which can drive up prices if supplies are low. External factors, such as OPEC's maneuverings and war in Iraq can also influence prices, as can the sudden decision of dual-fuel users to switch fuels," said Rooney.

Weather experts predict a "normal" cold winter, compared to last winter, which was 12% colder than normal, said Rooney. But, while normal winter weather is predicted, statistical variables trend toward a colder than normal winter. Inventory stocks of both home heating oil and natural gas are at traditional levels for this time of the year.

Home heating oil in New York State currently averages about $1.50, approximately 10 cents higher than last year at this time. Long Island will begin the heating season with the highest natural gas prices in history as spot natural gas prices are approximately 150% higher than two years ago at this time. More expensive gas which was put in storage during the summer and fall will translate into higher residential prices when those stocks are withdrawn over the winter. Compared to two years ago, #2 home heating oil is up about 10 cents, though for the last four years, prices have been within 20 cents at the beginning of each heating season.

Rooney cited various sources, including the annual U.S. Department of Energy/Energy Information Administration (EIA) Winter Fuels Outlook Conference held in Washington, D.C. in October. He noted that the EIA has projected a decline in natural gas prices for January - March 2004, which would contradict the trend for the past few years. However, there are significant concerns about the high natural gas prices, and Federal Reserve Chairman Alan Greenspan has recently warned about their possible negative effect on the U.S. economy.

Gas and propane prices have been especially volatile in the past year, and in the first quarter of 2003 shot up due to very tight supplies. This led to more than 30 days of gas curtailments and interruptions to large dual-fuel users on Long Island during this period. Gas prices at the wellhead continued to remain high for the spring and early summer and as a result, the inventory was not significantly increased because suppliers declined to purchase high-priced gas for their inventories on which they would make a lower profit.

Stocks of home heating oil were on the low side of average through the spring and summer, in part because of the colder than normal winter and spring. There was also heavier than normal use of oil by dual-use customers, since oil prices were lower than gas prices on an equivalent basis. Decreased residual demand by utilities due to the cooler-than-normal summer led to a strong inventory stock build heading into the winter.
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