WINTER HEATING FUEL AND GASOLINE COSTS ARE UP

The outlook for winter 2004 household heating bills compared to winter 2002-2003 indicate that natural gas-heated homes are up 8 percent; propane-heated households are up 3 percent and homes with electric heat are up about 2 percent. These projections are national average values.

The December 2003 average motor gasoline price (regular unleaded gasoline) is estimated to have fallen to $1.48 per gallon from $1.51 in November. Due to high crude oil costs and the tight inventory situation, pump prices may increase on a monthly basis through the rest of winter and into late spring. Current gasoline inventories appear to be about normal now. Nevertheless, relatively low total petroleum inventories are likely to keep product prices firm.

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Natural gas spot prices in the United States exhibited strong volatility in December, starting the month at around $5.00 per million Btu, spiking to roughly $7.00 per million Btu in the middle of the month, then falling to $5.50 toward the month's end as warmer-than-normal weather eased demand. Spot prices well above $5 per million Btu remain likely over the next few months if normal, or colder, weather prevails, especially with oil prices remaining at relatively high levels. Natural gas storage levels are now slightly above average and may move prices back down if warm temperatures and weak heating demand occur later this winter, just as rising prices are possible if the weather becomes colder. In 2004, natural gas prices are expected to average just under $5 per million Btu, falling somewhat along with oil prices. In 2005, natural gas spot prices are projected to fall again to average $4.83 per million Btu under the assumption that domestic and imported supply can continue to grow by about 1 to 1.5 percent per year.

Source: Energy Information Administration\Short-Term Energy Outlook — January 2004.

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