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Staying warm could be a bit pricey this winter. Is anyone to blame?

In the blame game for this winter's anticipated high heating costs, some point a finger at Obama, and others the oil industry. But energy analysts say expected cold weather is the major culprit.

By Ron SchererStaff writer / October 10, 2012



New York

It could cost a lot more than last year to stay warm.

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If the weather forecasts of a colder, snowier winter come true, the Energy Information Administration (EIA) says homeowners who use heating oil – mainly people living in the Northeast – will end up paying $2,494 on average to heat their homes compared with $2,087 last year, up 19 percent. This winter’s expenditures would be a record.

Natural gas users, the largest proportion of homeowners, will pay about the same price as last year but will need to use more energy to keep the house warm. As a result they will spend $697 compared with $608 last year.

Who is to blame? The oil companies? The Obama administration?

“The main reason is the weather, we have very small changes in price,” says Tancred Lidderdale, an energy analyst at EIA in Washington. “Last winter we had record-setting warmth and this winter will return to normal, which means higher consumption.”

However, some other analysts say there is more than just the weather to blame.

US refiners are exporting a large amount of diesel to Europe and Latin America, says Sandar Cohan, a principal at Energy Security Analysis Inc. (ESAI) in Wakefield, Mass. Diesel and home heating oil are closely related from a refining perspective.

“The export demand for diesel has been astronomical,” says Mr. Cohan. “The refineries are pushing hard to meet demand.”

Cohan says the big oil exporters are dipping into inventories to meet demand. Nationally, the inventories of diesel are down by 20 percent compared with last year. In the Northeast they are down by 30 percent compared with last year.

“Inventories are relatively low going into winter,” he says.

In addition, some big refineries have had to shut down for repairs. For example, Chevron’s big refinery in Richmond, Calif., remains partially closed after a fire. Recently, a power failure at an ExxonMobil refinery in Torrence, Calif., also cut supply. The ExxonMobil facility is back up and running.

“By the beginning of the year we should get some relief from the refinery outages, but until then, over the next couple of months, prices will be volatile for the diesel markets,’ says Cohan.

ESAI anticipates home heating oil will peak at the end of November at about $3.20 a gallon at the wholesale level. Adding transportation and taxes, homeowners can expect to pay another 70 cents a gallon.

Since this is an election year, some groups are blaming President Obama for the higher prices.

Thomas Pyle, president of the Institute for Energy Research, says Mr. Obama’s delay in approving construction of the controversial Keystone XL pipeline and reopening federal property to oil and gas development has had an adverse effect.

“Today’s EIA report confirms that American homeowners will now face a worst-case scenario for energy prices this winter, due in large part to failed Obama policies that restrict access to North American energy resources,” Mr. Pyle said in a statement.

However, energy analysts, asking not to be involved in the politics, say the upcoming harsh winter is the greater villain. EIA for example, has prices very similar to last winter. The main change in the forecast is increased consumption.

AccuWeather in State College, Pa. forecast this month that this winter will be colder and snowier than normal, especially in January and February. The weather service anticipates a weak El Nino will form in the Pacific Ocean. This will cause the jet stream to dip further south, allowing colder air to infiltrate the I-95 corridor.

AccuWeather says the same weather pattern was in place for the winters of 2006-2007, 2002-2003, and 1953-1954.

In those years there was above normal snowfall from the southern Appalachians to southern New England. The biggest storms will take place in January and February. “Once the snowfall starts, temperatures will be below normal through February,” AccuWeather’s Meghan Evans predicted in an interview.

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