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Good news on heating costs — lower bills

The government has further lowered its projections for winter heating costs because of the dramatic drop in crude oil prices.
/ Source: The Associated Press

The government has further lowered its projections for winter heating costs because of the dramatic drop in crude oil demand and prices.

The Energy Department said Tuesday that because of the worldwide economic slowdown it expects global crude oil consumption to decline by 450,000 barrels a day next year, the first time in three decades that global oil demand would fall for two years in a row. U.S. oil demand, which fell by 5.8 percent this year, also is expected to continue to go down.

The plunge in demand will keep crude oil prices in check through 2009, said the report by the department’s Energy Information Administration.

Crude oil prices are expected to average $51 a barrel next year, nearly a third of the cost when oil peaked at $147 a barrel last summer. Oil prices are likely to remain relatively low despite production declines. Prices hovered at just over $43 a barrel Tuesday on the New York Mercantile Exchange.

The EIA said the Organization of Petroleum Exporting Countries is likely to pump 1.6 million fewer barrels a day in 2009 than it did this year, but that the decline will be partially offset by an expected increase of 410,000 barrels a day by non-OPEC producers.

The OPEC countries are scheduled to meet Dec. 17 to decide on future production targets.

The report confirmed that because of the economic slowdown — and high prices during much of the year — Americans are using less oil. It said U.S. petroleum consumption dropped by 1.2 million barrels a day in 2008 to 19.5 million barrels a day, a 5.8 percent decline from 2007.

That has had an impact on retail energy prices, the EIA report showed.

The EIA projects gasoline costs would average $2.03 a gallon next year, and diesel $2.47 a gallon. The price of both gasoline and diesel has dropped by about $2 a gallon since mid-July to a national average this week of $1.70 a gallon for gasoline and $2.52 a gallon for diesel.

Fuel oil for heating this winter will be nearly a fourth less than what it cost last winter at $2.53 a gallon. While demand is expected to rise slightly because of colder weather, households are expected to pay on average $1,570 this heating season, or $383 less than last winter.

Households using natural gas are expected to pay an average of $860 this heating season, about the same as last year, despite sharply declining wholesale natural gas prices. The retail costs reductions are lagging because a third or more of the gas being used by utilities comes from storage and was purchased last summer when natural gas prices were much higher.

The EIA said the wellhead spot price for natural gas is expected to drop to an average of $6.25 per thousand cubic feet next year, compared with a projected average of $9.17 per thousand 1,000 cubic feet in 2008. Natural gas for January delivery was $5.53 per thousand cubic feet Tuesday on the New York Mercantile Exchange.

The predicted 450,000 barrel a day decline in global oil demand next year reflects the more severe and longer economic slowdown now widely anticipated, the EIA said. Global oil demand declined by about 50,000 barrels a day this year, the agency said.

The world used 85.7 million barrels a day in 2008, an amount expected to drop to about 85.3 million barrels a day in 2009.