In the 2019 Winter Fuels Outlook, released on October 8, the U.S. Energy Information Administration (EIA) forecasts expenditures for residential space heating with natural gas to be 1% (about $8) lower during winter 2019‒20 (October to March) than last year but 5% higher than the five-year average.
Residential natural gas expenditures are a result of both the volume of natural gas consumed in households during the winter and the price of delivered natural gas.
The estimated expenditures this winter, about $580 per household on average, are lower primarily because expected demand for space heating is lower than last year. The National Oceanic and Atmospheric Administration (NOAA) expects temperatures for this coming winter to be warmer than last winter, forecasting 4% fewer heating degree days (HDDs) across the United States.
In the residential sector, because natural gas demand closely follows heating demand and expenditures are tied to consumption, the weather is a key factor in EIA’s forecasts of residential natural gas demand and expenditures. Excluding year-round natural gas consumption for water heating, cooking, and (in some households) clothes drying, most incremental residential consumption is for space heating. So, in the summer months, natural gas consumption remains at a relatively low, flat level. All growth outside of the baseline, year-round end uses is the result of heating demand.
The forecasted decline in heating demand associated with lower heating degree days is expected to offset higher delivered residential natural gas prices in most regions of the United States. EIA forecasts the U.S. average residential natural gas price to be $10.03 per thousand cubic feet (Mcf) this winter, up from $9.76/Mcf last winter. Prices across the country are also highly variable, reflecting both regional supply/demand dynamics and infrastructure constraints. EIA forecasts residential natural gas prices to rise by 3% in the West, 5% in the South, and 8% in the Midwest regions, but to decline by 6% in the Northeast as new infrastructure allows more natural gas to be transported throughout the region, reducing transportation delivery costs.
EIA expects wholesale natural gas prices to be 24% lower this winter, with spot prices at Henry Hub averaging $2.66/Mcf, because of strong production growth and natural gas storage inventory levels that are higher than the five-year average. However, changes in natural gas spot prices do not pass through to residential customers immediately.
