Home Heating Prices on the Rise, Again?

BusinessWeek warns that heating your home this winter could become even more expensive than last winter. Why? Summer demand on gasoline despite rising prices may limit the oil needed for heating homes. By May 5, 2007, regular gasoline was selling at an average of $3.05 per gallon. The Energy Information Administration has raised its forecast for the average cost of gasoline for summer 2007 to $2.95 per gallon. Despite these high gasoline prices, drivers are still filling up, with demand up about 2% from the previous year.

It is expected that the demand for gasoline will increase as income and job growth are increasing. Refinery problems, however, have depleted inventory levels, limiting gasoline production in the United States to 88.3% capacity at the end of April, some 12% under normal capacity. This dip in capacity levels may force refiners to increase gasoline production as the summer demand increases. Imported oil amounts are also down due to refinery issues in Europe, Venezuela, and Nigeria. With weekly stockpiles of heating oil down 20% from the previous year and production of gasoline currently twice as profitable for refiners than the production of heating oil, supplies could remain low and prices could be on the rise as the winter heating season approaches.