Americans are staring down the nose at astronomical energy prices in the coming winter months, driven by a combination of colder-than-average temperatures and price hikes amid Russia’s invasion of Ukraine.
But these elevated costs will not hit regions of the country evenly, and they could have a serious impact on lower- and middle-income families nationwide whose paychecks are already getting eaten up by inflation.
Data released by the Labor Department last week showed that prices increased for the second consecutive month. The same report showed the index for natural gas increased by 2.9 percent, while the gasoline index declined by 4.9 percent month over month.
Gasoline prices rose 18.2 percent over the past 12 months, while the index for energy services increased by 19.8 percent.
But how does this translate to your energy bill?
The Labor Department’s data came after a separate report warned of a sharp rise in energy costs this winter, after average heating expenses across all fuel types increased by 17 percent last winter to $1,025.
The U.S. Energy Information Administration (EIA) projected another spike in costs is due to two factors: increased fuel costs and colder-than-average temperatures.
In the coming winter, the EIA projects natural gas costs will increase the most among fuel sources, by about 28 percent. Heating oil costs are projected to spike almost as much, about 27 percent, followed by electricity at 10 percent and propane at 5 percent.
The EIA’s base scenario shows from October 2022 to March 2023 Americans who heat their homes with natural gas can expect to pay $931 seasonally, while the average expenditure for those whose homes are heated by heating oil are projected at $2,354.
A base-case scenario winter could see electricity seasonal costs reaching an average of $1,359 and average propane costs hitting $1,668.
Meanwhile, in a scenario where winter is 10 percent colder than 2021-2022, average household expenditures for natural gas will increase 51 percent, compared to 37 percent for heating oil, 20 percent for electricity and 36 percent for propane.
If winter weather is 10 percent warmer, the EIA projects an increase of 19 percent for natural gas, 12 percent for heating oil and 8 percent for electricity. In the warmer-winter scenario, propane costs are projected to be 12 percent lower, the only fuel source in any scenario projected to be cheaper.
But the price of Americans’ utility bill will also depend on their geographic location.
Regions more reliant on natural gas and heating oil will be slapped with a more expensive bill. Although natural gas accounts for only 46 percent of the nationwide share of fuel, it makes up 55 percent of the fuel source in the Northeast, 64 percent in the Midwest and 53 percent in the West.
As a result, the EIA projects the average seasonal retail price, in dollars per million cubic feet, to increase $16.78 in the Northeast, $13.80 in the Midwest and $17.46 in the West. And even though natural gas only comprises 28 percent of fuel in the South, the region will also see an increase of $16.60, according to the EIA.
Heating oil increases, meanwhile, will disproportionately affect the Northeast.
Only about 4 percent of U.S. households use heating oil as their primary heat source, but those households are projected to spend about $2,350, a 27 percent increase from 2021-2022. Consumption of heating oil is expected to increase 9 percent, while retail prices are expected to rise about 64 cents a gallon.
Experts also point to increased exports of liquefied natural gas (LNG) to Europe amid Russia’s war in Ukraine. European countries have sought to economically isolate Russia in retaliation for its invasion of Ukraine and have cut back consumption of Russian natural gas.
As a result, the U.S. has stepped up to make up the difference, increasing energy prices for Americans.
An analysis by consumer advocacy group Public Citizen indicated that in the first half of the year, U.S. natural gas exports more than doubled compared to 2022, with exports of about 336 billion cubic feet of LNG per month and a total of 591 billion cubic feet of natural gas per month.
The industry has “really seized on European demand for fracked gas,” said Alan Zibel, research director at Public Citizen. “Europeans are willing to pay just about any price for natural gas, so that drives the price up.”
The organization found that the relative lack of regulation in natural gas exports means that American consumers are increasingly affected by volatile global energy markets.
In an interview with The Hill, Zibel cited a survey by the Federal Reserve Bank of Dallas in which nearly 70 percent of respondents said the increase in exports will bring an end to the cheap gas prices spurred by the fracking boom of the early 20th century.
The Energy Department has recently sought to offset potential shortfalls of heating oil in the region this winter as well. In August, Energy Secretary Jennifer Granholm said in a letter to seven U.S. refiners that America is putting northeastern heating oil and natural gas reserves on “active standby” for a possible release if necessary.
Expected utility increases follow other common household price hikes like those seen in rental rates, groceries and gasoline.
Although gasoline prices have fallen significantly from their June high at more than $6 per gallon for regular grade fuel, the price at the pump remains high with a national average of $3.87 per gallon.
Grocery prices alone rose 13 percent over last year, exceeding the 8.2 percent growth of all other consumer products. And despite recent declines in the rental market, asking rents are up 9 percent year over year.
These compounding factors will make it tough on working families to make ends meet.
“Overall, the impact on middle- and lower-income families is going to be quite severe, because energy is not proportional to income. So as your income goes up, your share of income for energy goes down,” Mark Wolfe, executive director of The National Energy Assistance Directors Association, told The Hill.
“For working families, this is devastating. … If it was just energy prices going up, I think it would be a different situation, but it’s energy on top of these other core needs,” Wolfe said.