Rapidly rising energy prices are now a leading cause of price inflation in the United States. According to the Bureau of Labor Statistics, while average inflation is 6.2 percent between October 2020 to October 2021, energy inflation is running at 30 percent, with fuel oil, propane and other fuels up 48.3 percent, regular gasoline up 51.3 percent and energy services such as electricity and utility gas up 11.2 percent.
During the course of the four-month winter heating season, the combined increase in the price of gasoline and home heating will cost the average family between $585 and $1,045 extra this year, depending on the type of heating system in their home. For many families the total increase in gasoline and home heating will exceed the total average amount — $648 — that they spend on gifts for family, friends and co-workers this holiday season.
Gasoline prices have now reached $3.40 a gallon, their highest level since 2014 — up by $1.29 a gallon in the last 12 months, an increase of 62 percent. The average family will spend about $103 more per month for gasoline, up from $136 per month last year to $239 a month going forward.
As if this weren’t bad enough, families are also facing higher prices for home energy this winter; U.S. Energy Information Administration (EIA) has forecast that for those using natural gas, prices are expected to increase by $173 from $573 to $746, electricity by $76 from $1,192 to $1,268, heating oil by $524 from $1,210 to $1,734 and propane by $631 from $1,158 to $1,789.
For low-income families, the price increase is significant and could cause many to have to choose between heating their home this winter and buying presents.
About 29 percent of Americans who were surveyed had to reduce or forego expenses for basic household necessities to pay an energy bill in the last year, according to the U.S. Census Bureau’s Household Pulse Survey.
The high cost of gasoline and home heating will place a heavy burden on lower income families this winter heating season, forcing many to cut back on their holiday spending as well as limit their spending on food, medicine and other essentials in order to keep their homes warm and buy gasoline to pick up their children from school, drive to work, and buy groceries.
There is nothing that low-income families can do to reduce the rate of increase in gasoline or home energy prices, and there are practical limits to what they can do to reduce consumption. But there are many actions the federal government can take to reduce pressure of rising prices on struggling families.
While there is no federal program designed to help families pay rising gasoline prices, there are significant additional resources that were provided under the American Rescue Plan that are available to help families pay home energy bills. These funds include $4.5 billion in funds for the Low Income Home Energy Assistance Program (LIHEAP) in addition to the program’s regular $3.8 billion appropriation and $21.5 billion in Emergency Rental Assistance Funds that can also be used to help cover utility bills.
There has never been this much money available to help families pay their home energy bills. Getting it to those in need will require an unprecedented level of coordination between the Biden administration, state and local agencies and the utility and delivered fuels companies that provide home energy to families. It is a significant challenge, and the clock is literally ticking as winter rapidly approaches.
Last week the administration took a major step in helping low income families to access additional energy assistance funds by easing application rules to apply for energy assistance as well as calling on utilities to voluntarily agree to suspend shut-offs for families that are applying for federal energy assistance. In addition, the administration recommended that state and local governments use resources available through the State and Local Fiscal Recovery Fund to help middle class families who are struggling to pay their home energy bills and might not be eligible for regular energy assistance programs.
The administration’s message is clear: If we are to help millions of families pay their home energy bills this winter and avoid shut-offs due to non-payment, all interested parties — federal, state and local governments, utilities and delivered fuel providers and local administering agencies — must work together to get the necessary resources into the hands of those who need them.
Mark Wolfe is an energy economist who serves as the executive director of the National Energy Assistance Directors Association, representing state directors of the Low Income Home Energy Assistance Program (LIHEAP).