Lighter energy prices should brighten the holidays for consumers

Energy prices are lower — at the pump and for winter heating — which should help consumers have a cheerier holiday season.

Plummeting gasoline prices have gotten the most attention, dropping about $1 a gallon from this year’s peak in the Kansas City area. That’s understandable — they usually grab the biggest chunk of a household’s energy budget.

But prices for natural gas, the most-used home heating fuel in the Midwest, also are far less than they were a few years ago. And prices of propane, popular in small towns and farms in Missouri and Kansas, are shaking off the volatility they showed last winter and appear headed for a much calmer period.

The three fuels, which have all seen big price spikes at various times in the last decade, are being tamer and are set to save consumers hundreds of dollars in cheaper energy costs.

“We haven’t seen a combination this good for years,” said James Williams, an analyst for WTRG Economics. “It’ll make for a bigger turkey.”

Among energy prices, the bane of family budgets, the outlier this year is the cost of electricity, which is continuing a steady climb.

Kansas City Power & Light, for example, is asking regulators to approve a 15 percent increase in rates for a large part of its territory in Missouri, including Kansas City. When coupled with previous increases, the utility’s customers would be paying 50 percent more for electricity than a few years ago.

But gasoline, the traditional villain, is taking a breather for now. Prices are their lowest in four years, at $2.61 a gallon on the Missouri side of the Kansas City area and a few cents higher on the Kansas side. For the average household with two vehicles, the savings amount to $100 a month compared with prices at this year’s peak. Compared with prices a year ago, the monthly savings are $30.

Heating oil, rarely used in this area but a mainstay heating fuel on the East Coast, is also down, with prices falling from $3.08 a gallon in June to $2.36.

Lower energy prices were credited this week with helping boost consumer confidence. It’s now at its highest since 2007, according to a monthly index by the University of Michigan.

The lower prices are being credited with reining in the overall cost of living. The U.S. Department of Labor said Thursday its consumer price index was unchanged from a month earlier and said tame energy prices were a main reason.

“Overall, consumer fundamentals look very positive heading into the end of the year,’’ David Kelly, an analyst for J.P. Morgan Funds, said in another report.

Signs that consumers are beginning to shake off the sluggish economy were reflected in AAA’s travel outlook for Thanksgiving. More than 46 million trips of at least 50 miles, a jump of 4.3 percent from last year, are expected. That’s the most since 2007.

“I’m sure (lower gasoline prices) are going to have a positive impact on folks,” said Mike Right, a spokesman for AAA in Missouri.

But it’s not just gasoline prices that have been helping.

The recession, as it entered 2009, knocked the wind out of most energy prices. The national average for gasoline peaked at $4.11 a gallon in 2008 but fell over half by January 2009. Natural gas and propane prices were also down, with the wholesale cost of natural gas in March 2009 less than half what it had been a year earlier.

But then natural gas and gasoline took different paths. Gasoline in a few months began a steady recovery and by late 2010 topped $3 a gallon, a figure it never fell below until recently. Natural gas, the first to benefit from fracking and horizontal drilling to tap underground rock formations, remained down as supplies climbed.

As a result, consumers paid less to heat their homes, at times saving hundreds of dollars a winter, which offered some relief as gasoline prices rose.

The news for natural gas is still good. U.S. gas production increased 4 percent this year, and the federal Energy Information Administration expects wholesale prices to be less in 2015 than this year.

But there have been hiccups. The recent below-normal temperatures rattled energy markets enough to raise wholesale prices slightly, which area gas utilities are passing on to customers. The rise in the cost of gas, including the cost for transportation and storage, was enough to raise an average residential bill by $4 per month.

Still, the cost of gas is about half what it was a few years ago.

The National Weather Service is expecting more-normal temperatures in December, and the amount of gas in storage is still healthy.

“If the weather goes back to normal, the price should go back down,” said Jim Bartling, a spokesman for Atmos Energy. “We’re in good shape, and our storage is full.”

Greg Noll, the head of the Propane Marketers Association of Kansas, said his industry has been working hard to avoid what happened last winter, when prices peaked at $4.20 a gallon in January and some paid much more. Average residential prices were $1.94 last week, according to the Energy Information Administration.

Propane is a hybrid when it comes to prices. It’s a byproduct of natural gas, but because it’s a liquid fuel it can also be affected by petroleum prices. But that wasn’t the problem last winter.

A moist corn crop that needed more propane to dry, lower storage levels at the start of the heating season, transportation problems and a cold snap that boosted demand created a crisis that culminated in January. In some cases, consumers paid a couple of thousand of dollars more to fill their propane tanks over the winter.

When it comes to energy prices, there are no sure bets. The drop in gasoline prices could stall and even rise if, for example, OPEC decides to cut production. A long and harsh winter would put pressure on natural gas and propane.

But there is cautious optimism that the financial relief will continue for consumers. For propane, transportation and weather remain a nagging worry, but concerns have eased about serious shortages. This year’s corn crop didn’t need as much propane, and there’s a third more propane in storage than a year ago. Customers were urged to fill their tanks before winter and that seems to have happened.

“It’s different this time than last winter,” said Noll.

This story was originally published November 21, 2014 at 6:32 PM with the headline "Lighter energy prices should brighten the holidays for consumers."