The Energy Information Administration (EIA), in its October 2008 Short-Term Energy and Winter Fuels Outlook (STEWFO), warned consumers that not only might they expect the prices of natural gas, heating oil, propane, and electricity to be higher in the winter of 2008-2009 compared to those of 2007-2008, but that the National Oceanic Atmospheric Administration's (NOAA's) projections forecast a 2.4% colder winter compared to last year. For the United States as a whole, the revised STEWFO projections are that natural gas customers might expect to see their expenditures rise by 0.2%, heating oil consumers might see their expenditures fall by 19.6%, propane expenditures might fall by 12.4%, and electricity expenditures might rise by 7.9%. Due to volatile market dynamics, the prices used in the STEWFO may not yield the forecasted declines in expenditures. If oil prices continue to fall, or stabilize at lower levels, the STEWFO estimates could be high. These increases follow a 4.3% increase in production in 2007. Key factors in determining the accuracy of the STEWFO projections are likely to be the weather, the effect of what appears to be a deteriorating economic condition, and the level of oil prices. As a result, the price of home heating oil is closely related to the price of oil as well as the price of diesel fuel. The key risk factor for consumers of home heating oil is the price of oil. Oil prices have been volatile in 2008. However, expenditure decreases for this heat source are less than those expected for home heating oil consumers. Electricity prices are directly affected by the cost of raw materials, notably natural gas prices, and coal prices, which are expected to continue to decrease from the peaks attained earlier in 2008. At the beginning of the 2008-2009 winter heating season the price of crude oil has been observed to be below $50 per barrel, a decline of almost 66% compared to the recent peak prices. A lower price of crude oil directly reduces the price of home heating oil and propane. Heating Expenditure Assistance

The Low Income Home Energy Assistance Program (LIHEAP) is the primary federal government program to supplement home heating expenditures.
The Energy Information Administration in its Short-Term Energy and Winter Fuels Outlook (STEWFO) for the 2008-2009 winter heating season initially warned consumers of the likelihood of higher heating costs. Average expenditures for those heating with natural gas were forecasted to see their expenditures rise by more than 18%. Home heating oil expenditures were forecast to rise by 23%, propane expenditures by 11% and electric heating expenses by 10%. The forecasted increases in total expenditures result from higher prices for all energy sources, as well as the expectation of a colder winter than the past several years.
A revised STEWFO, reflecting lower oil prices, projected declines in home heating expenditures for those using heating oil and propane. In contrast, heating expenditures were expected to increase for consumers of natural gas and electricity, although by less than initially forecasted.
However, oil markets have continued to experience downward volatility recently, with the price of crude oil falling over 50% compared to the peak price reached in July 2008. If the downward trend in oil prices continues through the winter 2008-2009 heating season, or stabilizes at a lower level, the expenditure estimates of even the revised STEWFO may be overly pessimistic. This is because the price of oil is a major factor influencing all the home heating prices surveyed in the STEWFO to some degree. The price of oil directly affects the prices of heating oil and propane, which are petroleum products. The price of oil indirectly affects the price of natural gas, and also, therefore, electricity through a historical price parity relationship.
The key risk factors for the STEWFO estimates are likely to be the extent to which the U.S. economy continues to experience an economic slowdown that results in further declines in the price of crude oil. Additionally, the variability of the weather could affect the expenditure estimates.
The Low Income Energy Assistance Program (LIHEAP), the primary federal program to assist with home heating costs, has been funded at higher levels than last year, and its eligibility requirements have been expanded. As a result, this program appears to be able to provide aid to consumers should heating costs escalate.
This report will be updated.