Why people in the Northeast will be paying higher heating bills this winter

As fuel costs rise amid the U.S.-Iran and Russia-Ukraine wars, Americans in the Northeast may have to pay significantly more to heat their homes this winter.

With the price of diesel, in particular, increasing, so too will the cost of a home heating fuel known as heating oil or fuel oil that is commonly used in Northeast states.

Nearly 5 million U.S. households used heating oil as their primary heat source in the winter of 2023 through 2024, 82 percent of them located in the northeastern part of the country.

William O’Neil, principal research analyst at S&P Global, said that heating oil and diesel prices tend to move together, so when diesel prices go up, heating oil usually does, too.

“The price of diesel historically has a pretty strong relationship to the price of heating oil because they’re effectively chemically identical. They just have different additives, different treatments,” O’Neil said.

He said that those Americans could end up paying nearly 50 percent more this year to heat their homes than they were last year.

“It would not shock me if Americans or specifically New Englanders are paying something like $2 more per gallon than they were last winter,” O’Neil said. “Residential heating oil prices last winter were something like $3.75 to $4 a gallon, so an additional $2 per gallon on top of that, you’re talking about something in the range of 50 percent higher.”

The National Energy Assistance Directors Association, which represents state-level officials seeking federal funding to help people pay for energy, released its own analysis last week projecting that heating oil could cost 31 percent more this winter than last.

It estimated that the relevant households spent an average of $1,749 on heating oil last winter and projected they could spend $2,297 this winter.

Mark Wolfe, the group’s executive director, said that as diesel costs have risen further, prices may go even higher.

While heating oil saw the most dramatic increase in the group’s analysis, the organization projected that in general, Americans could spend an overall average of 8.7 percent more to heat their homes this winter.

It projected that natural gas could cost 5.8 percent more, electricity could cost 9 percent more and propane could cost 8.7 percent more.

Wolfe noted that higher fuel costs could have significant economic impacts for lower- and middle-income Americans.

“When you have budgets where there’s very little discretionary income, you have to cut back on groceries. You cut back on medicine. Any discretionary activities you don’t do. If you have to, you borrow from payday lenders. Some people fall behind in the utility bills and get shut off from power. It’s a spiraling effect,” he said.

He noted that this comes on top of high gasoline prices that are also straining Americans’ budgets. As of Friday, the national average gasoline price was about $4.47 per gallon, according to AAA . Diesel, meanwhile, was averaging $6.45 per gallon.

For heating oil specifically, Wolfe said that Americans typically buy the fuel by the beginning of October, meaning the increase could be felt before the midterm elections.

While it’s not entirely clear how this may play out politically, it comes as Maine and New Hampshire face competitive Senate races.

Wolfe said that he wants Congress to increase funding for the Low Income Home Energy Assistance Program (LIHEAP) to offset the high energy cost for the poorest families, saying the situation is “rapidly becoming a crisis in affordability.”

Costs of diesel, gasoline and heating oil are all going up because of both the U.S.-Iran conflict and the Russia-Ukraine war.

More specifically, both the price of crude oil and attacks on refineries that produce the oil are playing major roles.

Tom Kloza, chief oil analyst at Gulf Oil, said that the price of crude was high because of disruptions in the Red Sea.

“The Houthis were always a wildcard, and now the Houthis are very, very active,” Kloza said.

O’Neil, with S&P Global, also said that for oil, uncertainties about the future of the Strait of Hormuz are a factor, even as there is some movement in the crucial waterway.

“Earlier on in the war, there was there was this working up towards” a ceasefire, he said. “Now we’re in kind of a point where, with the Houthis getting involved, with the strikes on Saudi Arabia’s East-West pipeline, which was a vital conduit for oil to be exported out of the Middle East without having to pass through the Strait of Hormuz … It adds it adds a shroud of additional doubt that this war and its oil market implications are going to be resolved really anytime soon.”

On the refining side, Kloza pointed to Ukraine’s attacks on Russian refineries.

“The biggest problem for the world right now is that we are about 7 million barrels a day of refining capacity on the sideline and that means that you know refined products prices: gasoline, diesel, and jet fuel, are going to be sky high,” he said.