Keep Your Home Heated for Less

By Mark Williams, AP Energy Writer

Heating costs this winter figure to be cheaper for much of the country than they were a year ago, thanks to a glut of natural gas and fuel oil and a recession that's pushing down demand.

Does this mean you should lock in a rate now — or wait for prices to keep dropping?

Here are some questions and answers about heating costs for this winter.

Q: Where are prices compared with a year ago?

A: Natural gas prices are down about 80% and heating oil prices are half what they were a year ago, both on the New York Mercantile Exchange.

Q: So exactly how much will I save?

A: There are plenty of factors that go into figuring how much it will cost to heat your home this winter. The actual cost of natural gas and heating oil typically make up about two-thirds to three-quarters of the total bill. Consumption, of course, also is driven by how cold it gets this winter, how big your house is and how comfy you want the place to be when grandma comes for Christmas.

Of the 111 million households in the U.S., about 8.5 million use heating oil as their main heating fuel, and most live in the Northeast.
The current average price for heating oil in New York, for example, is $2.60 a gallon, nearly 40% lower than the year-ago price of $4.20. In Vermont, customers of Owner Services Inc. are paying about $2.35 a gallon, down about $2 a gallon from a year ago.

A consumer using 1,000 gallons of fuel during winter figures to save $1,600 this winter in New York compared with a year ago, based on current spot prices.

But there are some caveats. Most people fill their tanks three or four times during the winter. You are vulnerable to changes in spot prices if you do not lock in to a fixed contract that guarantees a price for a specific period.

As far as gas prices go, how much you will pay depends on the strategies used by the distributor that provides gas for the home.
Many use a portfolio approach where gas is bought under a mix of short- and long-term contracts, said Chris McGill of the American Gas Association. Many companies also use financial tools such as hedges to help keep prices under control.