Energy costs this winter: high
Heating-oil and natural-gas prices are already up, and gasoline costs could rise, too.
Unless it's a warmer than expected winter, heating the house this winter will cost consumers more money.
Indeed, this fall – even before the first real freeze – the first tank of home heating oil will cost consumers about 7 percent more than last year at this time.
Consumers who use natural gas to heat their home will also see price hikes, though they're likely to be more modest. Through July, natural-gas prices were 5.5 percent higher than last year at the same time.
In past winters, many consumers have shrugged off the rising cost of staying warm. But this winter, it may not be so easy: The economy is expected to continue slowing, and home prices are likely to continue to drop. Although the actual dollar amount of the higher heating costs may be small, economists worry about the effect on consumers from bad news.
Another piece of unsettling news for consumers: The price of crude oil is hitting record highs (not adjusted for inflation). On Tuesday, a barrel of oil closed at $81.51 on the futures market.
"The economy used to be so strong that even these blows [higher energy prices] hurt some but not everyone," says Dennis Jacobe, chief economist at the Gallup Organization in Washington. "Now, these more marginal impacts can hurt more people."
Higher heating costs are likely to hurt the lower and middle class the most since their income has a harder time keeping pace with the heating costs. "It's a bigger blow to them," says Mr. Jacobe.
Although winter heating costs may be higher, gasoline prices have remained flat. In fact, on Wednesday, the Labor Department reported that August consumer prices fell 0.1 percent – in large part because of a drop of 4.9 percent in gasoline prices and 4.2 percent in natural-gas prices.
But for the year, energy costs are up at a 12.7 percent annual rate.
Economists don't expect the lower gasoline prices to last, given the high prices of crude oil. Still, gasoline prices fell about 1 cent a gallon on a national basis between Tuesday and Wednesday, according to GasPriceWatch.com.
"We have not seen gasoline prices rising correspondingly because inventories are kind of high. But over time, we will see higher prices at the pump," says Scott Brown, chief economist for Raymond James & Associates in St. Petersburg, Fla.