WASHINGTON — Motorists have been enjoying falling prices at the gas pump for a while. This winter, lower gas prices will likely combine with lower home heating costs to sharply improve many household budgets.
“The fall in oil prices is worth about $75 billion to American consumers, and that’s a sizable amount of money that will put more cash in people’s pockets for Christmas shopping and for paying off holiday bills in January and February,” says Peter Morici, professor at the University of Maryland Smith School of Business and a former chief economist at the U.S. International Trade Commission.
The federal Energy Information Administration is forecasting that homeowners will pay less this winter for propane, electricity, natural gas and, especially, home heating oil compared to last winter.
“It was about $4 per gallon, at times, in the teeth of [last] winter. This year, we’re expecting that to be about $3.09 a gallon,” says Tim Hess, petroleum markets analyst for the Energy Information Administration.
The EIA bases its forecast for lower home heating costs on price and consumption of fuel.
“Last winter was very cold, which drove up expenditures. … Despite a fairly cold start to the winter in November, the National Oceanic and Atmospheric Administration is expecting this winter to be fairly close to normal temperatures,” Hess says, predicting that consumers will use less fuel and spend less for what they do use.
The EIA estimates that the region encompassing Maryland, Virginia and D.C. will spend about 2.3 percent less this winter for natural gas, 1.6 percent less for electricity and 20 percent less for propane. Nationwide, the cost for home heating oil is expected to plunge 26.8 percent.
Lower energy prices may not be a flash in the pan: The EIA estimates that gas prices will average about $2.60 a gallon next year.
“That should put between $500 to $600 in the pocket of your average driver next year compared to what they spent this year,” Hess says.
What might consumers do with the extra jingle in their pockets?
“Most folks are in pretty good shape on their household balance sheets; they’ve already paid down their credit-card debt from the Great Recession and so forth. My feeling is that sooner or later this money gets spent. If it doesn’t turn into holiday shopping, it’s going to turn into shopping in January and February. Americans — this cash will burn a hole in their pockets; it’s always that way,” Morici says.
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