Richard Newell, NASEO Winter Fuels Conference, October 2010 1

NASEO 2010 Winter Fuels Outlook ConferenceOctober 13, 2010 Washington, DC

Richard Newell, AdministratorU.S. Energy Information Administration

EIA Short-Term and Winter Fuels Outlook

Richard Newell, NASEO Winter Fuels Conference, October 2010 2

Overview

• EIA expects average heating bills to be 3% higher this winter than last

– an increase of $24 to a U.S. average of $986 per household

• Due to higher fuel prices forecast this winter compared to last– 2% higher electricity prices– 8% higher heating oil prices– 6% higher residential natural gas prices– 11% higher propane prices

• Bill increases are moderated by a warmer winter weather forecast for the South, but little change in the Midwest/West; slightly colder in the Northeast

• Inventories of fuel oil and natural gas are currently well above typical levels, which helps dampen price increases if winter is colder than expected

– in contrast, propane stocks are low in the New England region

Richard Newell, NASEO Winter Fuels Conference, October 2010 3

U.S. households forecast to spend an average of 3% ($24)more on heating bills this winter (October 1– March 31)

Percent change in fuel bills from last winter (forecast)

Fuel billBase case

forecastIf 10% warmer than forecast

If 10% colder than forecast

Heating oil 12 0 25

Natural gas 4 -7 12

Propane 8 -3 18

Electricity -2 -6 2

Average of all fuels 3 -6 10

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 4

U.S. population-weighted heating degree-days

0

200

400

600

800

1,000

Oct Nov Dec Jan Feb Mar

2009-2010 2010-2011 (NOAA forecast)

Winter 2010-11 heating season forecast is 3% warmer than last winter, and 1% warmer than 30-year average

Source: NOAA (September 15, 2010)

NOAA “winter” 7.4% warmer than last year

Richard Newell, NASEO Winter Fuels Conference, October 2010 5

Higher natural gas heating bills for some regions this winter

Percent change from last winter (forecast)

ConsumptionAverage

priceTotal

expenditures

0 -3 -3

-13 11 -3

0 6 6

5 7 12

-2 6 4

Households using natural gas as

primary heating fuel

53%

63%

33%

72%

52%U.S.

Northeast

Midwest

South

West

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 6

EIA expects residential natural gas prices to be6% higher this winter than last

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012

Winter

Residential price

Henry Hub spot price

Dollars per thousand cubic feet (mcf)

Source: EIA Short-Term Energy Outlook, October 2010

Forecast

Richard Newell, NASEO Winter Fuels Conference, October 2010 7

Future natural gas prices remain uncertain

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011 2012

Henry Hub spot priceSTEO Henry Hub price forecast

NYMEX Henry Hub futures prices68% NYMEX confidence interval

95% NYMEX confidence intervalDollars per million Btu Forecast

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 8

Less than 10% chance of natural gas price being higher than $5.50 per MMBtu for January 2011 contract month

7%

17%

35%

0%

10%

20%

30%

40%

> $4.50 / MMBtu > $5.00 / MMBtu > $5.50 / MMBtu

probability of exceedence

Source: EIA STEO Oct 13, 2010; and CME Group http://www.eia.gov/emeu/steo/pub/uncertainty.html

Richard Newell, NASEO Winter Fuels Conference, October 2010 9

Natural gas inventories are close to last year’srecord-high levels

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2008 2009 2010 2011 2012

Base case

10% colder

10% warmer

Billion cubic feet

Normal range

Source: EIA Short-Term Energy Outlook, October 2010

Forecast

Richard Newell, NASEO Winter Fuels Conference, October 2010 10

Winter electricity bill forecast shows little change from last winter

Percent change from last winter (forecast)

ConsumptionAverage

priceTotal

expenditures

0 -1 0

-6 2 -4

-1 1 0

3 2 5

-4 2 -2

Households using electricity as

primary heating fuel

37%

18%

61%

32%

13%

U.S.

Northeast

Midwest

South

West

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 11

Winter heating oil bills are likely to be higher in most regions

Percent change from last winter (forecast)

ConsumptionAverage

priceTotal

expenditures

2 7 9

-11 8 -4

-1 10 10

5 8 13

3 8 12

Households using heating oil as

primary heating fuel

7%

2%

2%

1%

30%

U.S.

Northeast

Midwest

South

West

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 12

U.S. heating oil retail price forecast to average 23 cents per gallon higher than last winter

0.00

1.00

2.00

3.00

4.00

5.00

2006 2007 2008 2009 2010 2011 2012

0

50

100

150

200Winter

Heating oil price

WTI crude oil spot price

Dollars per gallon

Source: EIA Short-Term Energy Outlook, October 2010

Forecast

Dollars per barrel

Richard Newell, NASEO Winter Fuels Conference, October 2010 13

Uncertainty over future heating oil prices is driven primarily by crude oil prices

0

1

2

3

4

5

2006 2007 2008 2009 2010 2011 2012

Heating oil average U.S. wholesale priceSTEO heating oil wholesale price forecastNYMEX N.Y. harbor heating oil futures prices68% NYMEX confidence interval95% NYMEX confidence interval

Dollars per gallonForecast

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 14

Less than 10% chance of wholesale heating oil price being higher than $2.75 per gallon for January 2011 contract month

3%

10%

27%

0%

10%

20%

30%

40%

> $2.50 / gallon > $2.75 / gallon > $3.00 / gallon

probability of exceedence

Source: EIA STEO Oct 13, 2010; and CME Group http://www.eia.gov/emeu/steo/pub/uncertainty.html

Richard Newell, NASEO Winter Fuels Conference, October 2010 15

Going into winter, distillate inventories are well above the upper end of the normal range

0

20

40

60

80

100

120

140

160

180

200

2008 2009 2010 2011 2012

10% colder

10% warmer

Million barrels

Base case

Normal range

Source: EIA Short-Term Energy Outlook, October 2010

Forecast

Richard Newell, NASEO Winter Fuels Conference, October 2010 16

Higher expected propane fuel bills in most regions

Percent change from last winter (forecast)

ConsumptionAverage

priceTotal

expenditures

-1 11 10

-13 8 -6

-1 15 14

5 9 14

-3 11 8

Households using propane as

primary heating fuel

5%

8%

4%

4%

4%

U.S.

Northeast

Midwest

South

West

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 17

EIA forecasts residential propane prices will average $2.42 per gallon, 24¢ per gallon higher than last winter

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2006 2007 2008 2009 2010 2011 2012

Winter

Forecast Dollars per gallon

Source: EIA Short-Term Energy Outlook, October 2010

Richard Newell, NASEO Winter Fuels Conference, October 2010 18

Propane inventories are near the middleof the normal range

0

10

20

30

40

50

60

70

80

2008 2009 2010 2011 2012

Base case

10% colder

10% warmer

Million barrels

Normal range

Source: EIA Short-Term Energy Outlook, October 2010

Forecast

Richard Newell, NASEO Winter Fuels Conference, October 2010 19

For more information

U.S. Energy Information Administration home page

www.eia.gov

Short-Term Energy Outlook www.eia.gov/emeu/steo/pub/contents.html

Annual Energy Outlook

www.eia.gov/oiaf/aeo/index.html

International Energy Outlook

www.eia.gov/oiaf/ieo/index.html

Monthly Energy Review

www.eia.gov/emeu/mer/contents.html

National Energy Information Center

(202) 586-8800

Live expert from 9:00 AM – 5:00 p.m. EST

Monday – Friday (excluding Federal holidays)

email: InfoCtr@eia.doe.gov