Colder winter, OPEC moves might boost

LI heating costs
Updated December 3, 2016 6:00 AM
By Tom Incantalupo Special to Newsday

Rod Roetheli, a driver for the Swezey Oil Co., delivers heating oil to a home in Port Jefferson Station
on Thursday, Dec. 1, 2016. Photo Credit: Newsday / John Paraskevas

Break out the sweaters and the checkbook.

Long Island homeowners are likely to pay more for their heat this winter than last
because of forecast lower temperatures and higher energy prices.
How much more they will pay, especially for the 55 percent of Long Island homes heated
by fuel oil, depends on volatile crude oil prices. Nationally, the U.S. Department of
Energy expects homeowners to spend $354 more on fuel oil this winter. Other experts are
less pessimistic about the cost of fuel oil, and expect Long Islanders rise in heating costs
to be half that amount or less.
Natural gas provided heat for about 46 percent of Long Islanders in 2014, the latest
period for which a figure is available, according to the New York State Energy Research
and Development Authority (NYSERDA). National Grid, Long Islands main supplier of
natural gas, forecasts an increase of 4.6 percent, or $35 in higher spending.

Nationally, the Department of Energy expects higher fuel costs and a bigger increase of
21.7 percent for the season, an increase of about $150.
The frozen Great South Bay is viewed through Icicles formed on the railings of a fishing
dock in Sayville, Jan. 8, 2014. Photo Credit: Newsday / Thomas A. Ferrara
The Organization of Petroleum Exporting Countries added more uncertainty to the
picture on Wednesday when its members agreed to reduce crude oil production by 4.5
percent, or 1.2 million barrels a day, by January. The deal pushed the price of U.S. crude
up by more than 9 percent to $49.44 a barrel on Wednesday. By Friday, the price had
risen to $51.65. A year ago, the cost was about $40 a barrel.
Whatever direction prices move, however, most analysts expect costs to go up because of
the weather alone. Last year was so warm its not going to take a whole lot for it to be
colder this winter, David Samuhel, a senior meteorologist for private forecasting service
AccuWeather, based in State College, Pennsylvania, said in an interview.
The Energy Department forecast in November that nationally heating oil could cost
42 cents a gallon more than last winter, rising 20.5 percent to $2.48.
With anticipated higher fuel use from colder temperatures, homeowners bills could rise
by almost 36 percent, the department said.
Long Islands prices tend to be higher than the national average. Heating oil averaged
$2.647 a gallon on Monday, the latest date the average is available, at full-service dealers
on Long Island, up 1.3 cents from a year earlier, according to the NYSERDA.
Heating costs on Long Island can have a spillover effect on the economy. Consumers
here, as in the nation, drive about 70 percent of the economy, economists say.
Cheaper heating costs boosted the economy a year ago, as fuel oil prices fell about a
dollar from the prior winter.
Last winter, temperatures at Long Island MacArthur Airport in Ronkonkoma averaged
6.1 degrees above the normal of 33 degrees. The main reason: the weather phenomenon
known as El Nio a warming of Pacific Ocean waters that influences weather in much
of the United States.
AccuWeather predicts temperatures in the Northeast will average 3 to 5 degrees lower
this winter than last but will still be above normal. One reason is another weather
phenomenon, known as La Nia a cooling of the water in the equatorial Pacific Ocean.
Another factor is the expectation that warm arctic air will push cold arctic air southward.
Federal weather forecasters also say that a colder winter relative to last year is heavily
favored, including more frequent periods of below normal temperatures, Stephen Baxter,
a meteorologist in the National Oceanographic and Atmospheric Administrations
Climate Prediction Center, said in an email.
The Energy Department forecasts a 12.6 percent increase in consumption of heating oil
this winter from last because of the expected colder weather.

An average Long Island home heated with oil uses about 800 gallons a year, according to
the Oil Heat Institute of Long Island, a Hauppauge trade group: 600 for heat and 200 for
hot water.
Until the OPEC deal was reached Wednesday, the U.S. benchmark grade of crude had
lately been trading at around the mid-$40s per barrel, roughly $5 more than a year ago.
Behind the Energy Departments higher forecast for prices is the decline since 2014 in oil
production from the relatively expensive hydraulic fracturing method in the United States.
Total U.S. production is slipping, the energy department said Nov. 8, from an average of
9.4 million barrels per day last year to a forecast of 8.8 million this year and 8.7 million
in 2017.
So the department forecasts higher crude oil prices next year, averaging $51 a barrel for
the European benchmark grade known as Brent, which is used in the refining of much of
the Northeasts heating oil and therefore is the biggest determinant of the heating fuels
price here.
Brent settled at $54.39 a barrel in London trading on Friday compared with $43.84 a year
earlier.
Some local and national analysts agree with the DOE that it will be a colder winter, but
they dont think fuel oil prices will rise as much.
Kevin Rooney, chief executive of the Oil Heat Institute, forecast Long Island heating oil
prices this winter will be about the same as last, generally around $2.60 a gallon.
He said he doubted the OPEC agreement will hold over the long term.
This one-million-barrel-per-day cut is virtually meaningless, given the enormous surplus
of crude oil we currently have in the U.S. and the world, he said.
Carl Larry, the Houston-based director of oil and gas for the global consulting company
Frost and Sullivan, thinks the energy department forecast for an increase in heating oils
price is about double what homeowners can expect. Were seeing a lot of supply out
there, he said. He thinks a 20-cents-a-gallon increase might result from higher demand
due to colder weather and demand for chemically similar diesel and jet fuels.
He doubted that OPECs action would affect that forecast materially.
The Energy Department also is forecasting higher natural gas prices nationally, from
growing domestic consumption and higher pipeline exports to Mexico. It forecasts that,
nationally, homeowners heating with natural gas will pay 9 percent more than last year
for the fuel and will use 11.7 percent more gas due to colder weather so that total bills
will be 21.7 percent, or $150, higher than last winter.
National Grid said its residential heating customers total natural gas bills are projected to
be about 4.6 percent higher from Nov. 1 through March 31 than last winter, rising to
$778. That assumes a normal winter, colder than the last.
Grids forecast price reflects a pending increase in gas delivery charges that would take
effect Jan. 1 with Public Service Commission approval.

The Energy Department said that, nationwide, homeowners who heat with electricity will
spend only 1 percent more per kilowatt hour this winter but probably will pay an extra
$49, or 5 percent more, to keep warm because of the anticipated colder temperatures.
PSEG Long Island, provider of most of the Islands electricity, estimated the average
heating customers bill for all electrical uses in December, January and February will rise
about 2.6 percent this winter over last, to $747. About 42,000 of its Long Island
customers have electric heat, the utility said. The forecast makes no assumptions about
temperatures this winter versus last.
Growing numbers of PSEGs customers produce their own electricity via solar electric
panels on their roofs, with equipment costs aided by federal and state tax credits of 30
percent and 25 percent, respectively, of the cost of the system. Homeowners augment
their supply with power purchased from the utility but, in effect, sell back any excess
power they produce to PSEG.
In addition to providing electric heat, electricity can power certain components of both oil
and gas heating systems. A relatively small number of homeowners have solar systems
that heat water but produce no electricity.
Equipment prices have been falling for years by half since 2008, said Joe Milillo,
chairman of the Long Island Solar Industry Association.
This year, though, the growth of solar slowed when a popular state rebate program for the
equipment ran out of money and ended in April, said Milillo, who is executive vice
president of solar installer Long Island Power Solutions of Islandia.
Still, PSEG said this year through October, there were 10,900 residential installations of
solar electric systems, about 1.6 percent more than in the year-earlier period.
Another heating source, used by less than 2 percent of Long Islanders as their primary
fuel, is propane. The Energy Department forecasts that, nationally, propane customers
will spend 21 percent or $346 more for heat this winter than last in the Northeast because
of prices that are about 7 percent higher and an expected 13 percent increase in
consumption because of colder weather.
Propane cost about $2.893 a gallon on Long Island on Monday, up 6.2 cents from a year
earlier, according to the state energy authority. It says about 35 percent of Long Island
homeowners use propane for auxiliary heating, indoor and outdoor cooking and heating
water.