After a mild winter last year, temperatures are expected to return to normal for winter if not colder. Accountant Kevin Den Adel wants people to be ready for the impact winter will have on their wallets while staying warm this season.
The Energy Information Administration has forecasted that American homes, particularly those in the Northeast, will pay more to heat their homes this winter than last year. Customers who use heating oil will see an increase of 19 percent, while natural gas heated homes will see a 15 percent increase. From an accounting standpoint, Kevin Den Adel knows that this will severely impact how families spend their money between now and when the first large drop in temperature happens.
If the weather does get as bad as forecasters say it will, poorer families will find this winter to be a hard one. The Low-Income Home Energy Assistance program, a government program that helps to subsidize the cost of heating homes, saw a $1.6 billion cut from congress. With only $3.5 billion to fund the program, families in need will see more of the cost of heating oil or natural gas this winter. Almost half of the homes in the United States use natural gas for their heating fuel. Only 6 percent use heating oil, but the vast majority of oil customers is located in the northeastern region of the country, where winter is expected to be quite cold again.
While heating oil will see a larger rise in price, the production of crude oil is expected to go up in the beginning of 2013. Kevin Den Adel teaches about the principle of supply and demand, and this is what is expected to help reduce costs at the turn of the year. The production of crude oil is expected to hit 6.9 million barrels a day next year, the highest rate of production since 1993. This is due in part to increased production in the United States in areas like North Dakota and Texas. Prices of oil per barrel are $111 currently, but with the increase of production it is projected to fall to $103.
Kevin Den Adel is an accounting professor who started teaching at Central College in Iowa. He is currently on the faculty at University of Iowa teaching various undergraduate and graduate accounting and auditing courses during the academic year.