Minor Thoughts from me to you

The High Cost of Staying Warm

Staying warm will be more expensive this winter -- 10-22% more expensive.

That's the sobering message from an Energy Department report Tuesday that estimates heating oil costs are likely to jump 22 percent and natural gas bills, on average, will rise 10 percent between October and March.

Why? Well, a continuing lack of sufficient U.S. refinery capacity, apparently.

Surging crude oil prices are the primary, but not the only, culprit for the jump in fuel oil costs. This spring and summer, American refineries experienced an unusual number of unexpected maintenance outages. The net result was that fewer refineries were producing gasoline, heating oil and other petroleum products.

The outages sent gasoline prices to a record $3.227 a gallon in late May as refiners scrambled to produce enough gasoline to meet peak summer driving demand.

"Because they used every ounce of the refinery to produce gasoline, it came at the expense of distillate fuels" like home heating oil, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

All of the demand for natural gas is boosting supplies, however. That could push prices down in a year or two.

Despite the government forecast, natural gas futures prices have actually been mostly falling in recent weeks. Inventories remained high as new sources of natural gas were tapped this year and a cooler summer depressed demand.

"We could have all-time record storage by the beginning of February," said Tim Evans, an analyst at Citigroup Inc. in New York.

On the other hand, supplies coming on line this year, including Anadarko Petroleum Corp.'s Independence Hub platform in the Gulf of Mexico and a portion of the huge Rockies Express natural gas pipeline project, are expected to boost natural gas supplies by 2 billion to 2.5 billion cubic feet.

"That's a lot of supply coming on," Denhardt said.

Finally, there's this poignant note:

Penny Taylor, who spent about $350 a month last winter to heat her Sarasota, Fla., home with electric heat, blanched when she heard about Tuesday's price forecast from the Energy Department.

"I think we're going to have to get a lot of blankets, because there's no way we'll be able to afford to run the heat," she said.

Everyone living north of the Mason-Dixon line weeps for you, Ms. Taylor. (I think she meant to say "there's no way we'll be able to afford to run the heat as high as we'd like to". We must all practice frugality, even with heating and cooling.)

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