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Heating bills, pump prices shock consumers

By Barbara Hagenbaugh, USA TODAY Homeowners across the USA are seeing huge jumps in their heating bills this winter from a year ago.

Tight supplies, cold weather and high oil costs are keeping prices elevated for most heating methods. But while there are only about six weeks left in winter, there is little relief in sight for high energy costs.

This summer, gasoline prices may beat last year's records. The average price at the pump last month hit the highest on record for the month of January at $1.62. Prices will likely continue to be elevated through spring and maybe into summer.

  Gasoline prices by region
Gas prices are up 3 cents a gallon nationwide from a year ago to an average of $1.64. Change per region:
Region Price per gallon* Change from year ago
East Coast $1.63 4 cents
Midwest $1.62 1 cent
Gulf Coast $1.55 -1 cent
Rocky Mountains $1.57 1 cent
West Coast $1.78 10 cents
* As of Monday Source: Energy Department

Last summer, gasoline prices hit $1.75 around Labor Day. "It could be 10% higher," says Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University, of this summer's price.

"It could get pretty ugly," says Bill O'Grady, director of futures research at A.G. Edwards. He notes prices will likely vary greatly by region. "It is probably going to be bad. We just don't know how bad or where."

Higher gasoline prices would certainly not help people like Chris and Diana Muzzo, who already are being hit by high heating bills. They put new energy-efficient windows into their Cincinnati condo before winter but still saw their monthly natural gas bill soar to $230 in January, the first time the bill topped $200 since Chris moved in more than three years ago.

"I shudder to think what the bill would have been without the new windows," lawyer Chris, 31, says.

Jenny Lawhorn Sammis and Scott Sammis of Richmond, Va., have turned down their thermostat since receiving a natural gas bill in January for $559.35, up 43% from last year.

"I was flummoxed," says Jenny, 34, who works in public relations at National Public Radio. "I never would have thought I would have a bill for more than $500."

Data out last week confirm it's not just a problem for users of natural gas, which is used to heat more than half of U.S. homes. Retail heating oil prices rose to $1.63 a gallon last week, up 6% from a year ago. Nearly one-tenth of U.S. homes are heated with heating oil.

The increased costs may make it tough for some homeowners to pay their heating bills. National Fuel Funds Network Executive Director George Coling says his organization, which works to help low-income people with their heating bills, has seen an increase in inquiries this winter.

Higher prices at the pump

Gasoline prices, not adjusted for inflation, hit records last summer and may be on track to break records this summer as well.

The average price of a gallon of gasoline was $1.64 Monday, the Energy Department said. That's up 13 cents, or 9%, from the beginning of the year.

What's happening:

Demand. An improving economy has led to higher energy use as factories run manufacturing lines longer hours and producers fill trucks with goods to head to stores across the country. A better economy also tends to boost leisure travel and, thus, gasoline demand, says Mantill Williams, spokesman for AAA auto club.

Supply. Gasoline supplies as of Jan. 30 were down 2.7% from a year ago and 4% below the five-year average, the Energy Department said in a report last week, noting inventories usually rise significantly in January in anticipation of the busier driving season.

"This may point to a tight gasoline market this coming spring," the Energy Department said.

Oil. The price of oil, which accounts for about half of the retail price of gasoline, has remained elevated, exceeding $30 a barrel for the last two months. Members of the Organization of Petroleum Exporting Countries oil cartel are expected to leave their production quotas unchanged after meeting today. That could keep oil prices high, pressuring gasoline costs.

Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas, says he expects gasoline prices will rise through the spring, then fall as oil prices moderate. But Brown, along with other analysts, warns there could be regional gasoline shortages and price spikes as a patchwork of regulations about gasoline mixes makes it impossible to simply ship gasoline from area to area when supplies in one region are short.

Not everyone is convinced gasoline prices are headed higher. Jim Williams, economist at WTRG Economics, says prices could fall as much as a dime in the next 30 days. He anticipates OPEC will keep supplies flowing, which will lead to lower oil prices. He also points to recent increases in U.S. oil imports.

Jenny Cohen, for one, is hoping for lower energy prices. She and her husband, Leonard, paid $253 to heat their Bethesda, Md., home with natural gas at the end of 2003, up 48% from the same time the year before. That was after replacing a door with a crack in it that they thought may have been releasing heat.

"We don't even keep it all that warm," accountant Jenny, 32, says. "It kind of burns me up to have to pay that much."


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