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Home heating may cost a bundle during winter

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CHICAGO (AP) — Whether they use natural gas or oil to heat their homes, consumers can expect higher energy costs this winter, with natural gas and heating oil prices near historic highs.

"This year the squirrel isn't burying any nuts and we're going into the winter on fumes," said Phil Flynn, an energy analyst for Alaron Trading Corp. in Chicago. "Unless something dramatic happens, we're looking at a very expensive winter."

Energy markets were jolted this week by a combination of developments that sent prices shooting higher — an unexpected drop in U.S. crude oil stockpiles coupled with a pipeline explosion in New Mexico and a hurricane that raised fears of another blow to already-low natural gas supplies.

Soon the aftershocks will be felt by consumers, whose utilities already were warning them to brace for big bills ahead. Suzanne deGraff, a natural gas customer from Rochester, N.Y., said she's been told her monthly bill from Rochester Gas and Electric Co. will jump about $26 to $130.

"I'm not happy," she said, "but, again, they're the only ones in town. What am I going to do?"

Whether a customer's utility provides natural gas or heating oil, there appears to be no way around prices heading higher than last winter — one of the costliest home heating seasons ever.

Home heating oil prices surged this week to their highest since the gulf war in the wake of industry surveys showing inventories of U.S. crude oil, its source, dropping to 24-year lows. Heating oil remains more than 50 percent more expensive than a year ago.

The increase is blamed partly on a cutback in production by the Organization of the Petroleum Exporting Countries.

Natural gas has rocketed upward for different reasons.

U.S. supplies of natural gas have been declining since the mid-1990s amid a drop in production by energy firms that didn't find it worth their while when prices were low.

Prices have more than doubled in the last year and a half and reached an all-time high of $4.85 per 1,000 cubic feet this week on the New York Merc.

Making matters worse, production hasn't been revved back up, rising just 1 percent this year. And demand is up sharply.

The nation depends increasingly on natural gas to generate electricity as utilities gradually switch from coal and nuclear-powered plants.

The situation has worsened this summer, with heavy usage for air conditioners preventing the industry from stockpiling for the winter as it usually does. Natural gas inventories are near six-year lows.

That leaves gas prices highly susceptible to supply disruptions — such as last Saturday's pipeline explosion in New Mexico that killed 11 people and shut down a primary gas main supplying California.

Hurricane Debby's brief advance toward key production facilities in the Caribbean and the Gulf of Mexico raised fears of similar trouble and propelled prices higher before they fell back.

Experts say consumers could skate by this winter only if last year's warmest winter on record is followed by one at least as warm.

"If we have a winter that's just normal, we're going to see potentially astronomical natural gas prices — much higher than we see today," said David Chang, senior energy trader for Bank of America in New York.


On the Net:

Alaron Trading Corp.: www.alaron.com

Organization of the Petroleum Exporting Countries: www.opec.org