Demand drives up heating costs

January 20, 2001

Demand drives up heating costs

By Andrea Brown-Hurley / Staff Writer

Strong demand for a tight supply of natural gas, heating oil and propane this winter means significant cost increases for most Tri-State area energy suppliers and their customers, according to the Maryland Energy Administration.

There will be "significant price increases in all heating sources except electricity" because of supply constraints and the return to colder temperatures after several mild winters, MEA Director Fred Hoover said.

Hoover said deregulation has also contributed to higher natural gas prices.

The average temperature for November was 42 degrees, down about 8 degrees from 1999. The average December temperature was 27 degrees, down 10 degrees from the year before, said Hagerstown Weather Observer Greg Keefer.

The overall number of days that people will need to heat their homes this winter will increase nearly 18 percent from last year, the federal Energy Information Administration predicted.


Raw natural gas costs 100 to 150 percent more this winter than it did last year, and natural gas customers are paying at least 40 percent more than last year, Hoover said.

Consumers' home heating oil bills have jumped by about 20 percent following a 50 to 60 percent rise in the cost of crude oil, he said.

The cost of propane, which is made from crude and natural gas, has risen about 30 percent for consumers and at least 60 percent for distributors, Hoover said.

Whatever the reason for the increase, Vernon Heil steamed when he saw his January propane gas bill.

"I don't even know what my blood pressure was. I was some hot," he said. "And I still haven't cooled off."

The price of propane had risen for the fourth month in a row, from $1.749 per gallon in October to $2.389 per gallon on the bill dated Jan. 4. The tanks that hold the sole heat source for Heil's Hagerstown-area mobile home were only about 30 percent full after a cold December. It took about 137 gallons of propane to fill them.

Heil paid Thompson Gas Co. $331.98 for the fuel, and swore to install an electric furnace as soon as his propane tanks were empty.

"I'm not going to continue to pay these outrageous prices," he said.

Prices up, supplies down

Thompson Gas Co. President Randy Thompson said he's never seen costs so high.

U.S. propane supply shortfalls and soaring natural gas and crude oil prices have forced suppliers such as Thompson Gas to pay twice as much as they did last year for propane, Thompson said.

In order to meet the propane demands of his company's 10,000 customers in Maryland, West Virginia, Pennsylvania and Virginia, Thompson had to send trucks to Rhode Island to pick up propane this month because his regular suppliers in Baltimore and Delaware couldn't meet the demand, he said.

The U.S. propane supply is at its lowest since 1996, in part because growing markets in other countries have reduced the propane available for U.S. import, according to a brochure that Boonsboro-based Thompson Gas sent its customers.

Meanwhile, the OPEC oil cartel has cut crude oil production, contributing to higher crude and propane prices.

Jeff McLaughlin, owner of McLaughlin's Heating Oils and LP Gas in Rouzerville, Pa., said he's dealing with propane shortages and high heating oil prices.

McLaughlin's nearly 4,000 customers have had to pay more than last year for heating oil because the distributor has had to pay about 40 percent more, he said.

Home heating oil prices have increased from an average of about $1.20 per gallon last year to about $1.50 per gallon this year, Hoover said.

Several large Tri-State area heating oil distributors, including Hardell Fuel Oils and Griffith Consumers Oil, formerly Ewing Heating Oil, refused to comment on oil prices.

Propane prices have also been affected by natural gas shortfalls.

Low storage levels of natural gas have decreased the availability of the winter supply and increased the cost of propane, nearly half of which is produced in natural gas plants. Propane is also often substituted for natural gas in industrial processes when natural gas gets too expensive, Hoover said.

Natural gas prices have spiraled.

Demand higher

Sharp increases in heating-related demand for natural gas this winter have drained supplies in storage for future use, nearly tripling raw natural gas prices in some areas and raising consumer heating expenses for natural gas an average of about 70 percent nationwide, according to the Energy Information Administration.

Increased usage plus higher costs equals a "double whammy" for consumers, said Rob Boulware, director of communications for Columbia Gas of Maryland, which serves more than 400,000 customers in Maryland and Pennsylvania.

In December, Columbia Gas customer Sharon LeHardy paid $240 for the natural gas that heated her Hagerstown home the month before. Her January bill was $610.

"I couldn't believe it," she said. "The gas bill was more than our mortgage."

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