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September 09, 2005
Winter Heating May Increase 71% in Some Areas
"There is no doubt that this is going to be a very tough winter season for the American economy (and) for American homeowners," Bodman said in an interview on the "Fox & Friends" television news program.The Energy Information Administration said on Wednesday Americans who warm their homes with natural gas could see their fuel costs jump by as much as 71 percent this winter in some parts of the country.
Residential heating bills for heating oil will increase by 31 percent, and electricity users will see their costs rise by 17 percent, the Energy Department's analytical arm said in its latest monthly energy forecast.
Oil sold-off this week from its recent highs. There are several reasons. First, there is the psychological relief that Katrina did not bring a larger energy disaster. Secondly, The international community’s energy aid – albeit temporary – helped to ease the market’s concern of a supply crunch. And as the week progressed, news of various refineries coming back on-line demonstrated the refining industry will be able to recover.
However, Katrina did not alter the underlying fundamentals of the US energy situation. Supply is still constrained by a lack of refiner capacity. The fact that refineries were down for a few weeks makes the supply situation worse because refineries could not pump out fuel for a few weeks. This will exacerbate the supply situation.
Consumers are already reeling from gasoline prices, which have topped $3/gallon according to AAA. High winter prices will extend the energy price shock, possibly as long as six months.
Let’s put two facts together:
1.) Consumer spending represents 2/3 of the American economy
2.) Consumers may see an energy price spike as long as 6 months in some markets.
3.) Retailers make most of their profits during the holidays.
Retailers have every right to be worried right now.
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Posted by Hale Stewart at September 9, 2005 08:16 AM | Permalink
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