Winter Heating Bills Loom as the Next Inflation Threat

Last winter was warmer than average, which led to residential energy bills that were comparatively low. This season, heating costs could rise to levels not seen a decade, even if there isn’t a severe winter. Several factors — lower global fuel inventories, incentives for producers to let prices rise and a mismatch between supply and demand as economies emerge from the pandemic — may combine to push bills higher regardless.

Mark Wolfe, executive director of the National Energy Assistance Directors’ Association, a group of state officials administering aid to low-income households, says those living paycheck to paycheck, or just trying to save, aren’t going to be soothed by complex explanations about inventory levels, supply chains or global demand. When the bills start coming in December or January, he said, “the public’s going to get angry.”

Expert forecasts suggest that the southern half of the country, which has milder winters and relies on relatively cheap electricity for home heating, may enter spring largely unscathed. But the Northeast and the Northern Plains, as well as rural areas nationwide, are far more dependent on heating oil and propane, which are highly exposed to price spikes in commodity markets.

Reflecting the particular concern in their region, a bipartisan group of senators from New England — led by Susan Collins, Republican of Maine, and Jack Reed, Democrat of Rhode Island — sent a letter to the White House last week urging “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 funds dedicated to the Low Income Home Energy Assistance Program, which provided an average of $439 to more than five million families the year before the pandemic. It received $4.5 billion in additional emergency grants this year. Usually, funding for the program isn’t released until all budget items for the fiscal year are approved, but Congress recently made an exception as cold months approached and sparring over spending bills continued.

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

The increase in home heating costs is sure to hover over economic debates in Washington about inflation. White House allies, fighting to push through the president’s sweeping agenda, assert that the current surge in consumer prices mostly reflects pandemic disruptions that will dissipate next year. Federal Reserve officials, who have been trying to put in place a policy framework less keenly sensitive to inflation, will be pushed to gauge whether that contention is well founded.