Winter Heating Bills Appear as Next Inflation Threat

Last winter was warmer than average, resulting in relatively low residential energy bills. Even without a severe winter this season, heating costs could rise to levels not seen in a decade. Various factors, such as low global fuel stocks, incentives for manufacturers to allow prices to rise, and the mismatch between supply and demand as economies emerge from the pandemic, can combine to push the bills even higher, no matter what.

People who live from paycheck to paycheck or simply try to save won’t be swayed by complex explanations, says Mark Wolfe, executive director of the National Association of Energy Aid Directors, a group of government officials that provide aid to low-income households. about inventory levels, supply chains or global demand. “People will be angry,” he said, when bills start coming in in December or January.

Expert estimates suggest that the southern half of the country, which has milder winters and relies on relatively cheap electricity for home heating, could enter spring largely unscathed. But the Northeast and Northern Plains and rural areas around the country are much more dependent on heating oil and propane, which are subject to high price increases in commodity markets.

A bipartisan group of senators from New England led by Maine Republican Susan Collins and Rhode Island Democrat Jack Reed reflect special concern in their district. Sent a letter to the White House last week, it called for “targeted actions” to provide relief “given the current state of energy markets”.

Last week, the Biden administration released 90 percent of the $3.75 billion in funding allocated to the Low-Income Home Energy Assistance Program, which provided an average of $439 to more than five million families a year before the pandemic. Received an additional $4.5 billion in emergency grants this year. Usually, funding for the program isn’t released until all budget items for the fiscal year have been approved, but Congress has made an exception recently as the colder months approach and controversy over spending bills continues.

Mr. Wolfe’s group has urged Congress to include an additional $5 billion in the social safety net package negotiated in Washington for the program.

The rise in home heating costs is certain to come on top of economic debates about inflation in Washington. Struggling to get around the president’s overarching agenda, White House allies argue that the current rise in consumer prices mostly reflects the pandemic cuts that will dissipate next year. Federal Reserve officials trying to create a policy framework that is less sensitive to inflation will be forced to gauge whether this contention is well-founded.