NEW YORK – Get ready to pay sharply higher bills for heating this winter, along with seemingly everything else.
With prices surging worldwide for heating oil, natural gas and other fuels, the U.S. government said Wednesday it expects households to see their heating bills jump as much as 54% compared to last winter.
The forecast from the U.S. Energy Information Administration is the latest reminder of the higher inflation ripping across the global economy.
As a result of the inflation boost, millions of retirees on Social Security will get a 5.9% boost in benefits for 2022. It is the biggest cost-of-living adjustment in 39 years.
The COLA, as it's commonly called, amounts to an added $92 a month for the average retired worker, according to estimates Wednesday from the Social Security Administration. It's an abrupt break from a long lull in inflation that saw cost-of-living adjustments averaging just 1.65% a year over the past 10 years.
The COLA is only one part of the annual financial equation for seniors. An announcement about Medicare's Part B premium they pay for outpatient care is expected soon. It's usually an increase, so at least some of any Social Security raise gets eaten up by health care. The Part B premium is now $148.50 a month, and the Medicare trustees report estimated a $10 increase for 2022.
With the COLA increase, the estimated average Social Security payment for a retired worker will be $1,657 a month next year. A typical couple's benefits would rise by $154 to $2,753 per month.
But that's just to help make up for rising costs that recipients are already paying for food, gasoline and other goods and services.
Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, which are having to pay more to attract employees. Average hourly wages rose 4.6% in September from a year earlier, a healthy increase, but not enough to keep up with inflation.
This winter is forecast to be slightly colder across the country than last year. That means people will likely be burning more fuel to keep warm, on top of paying more for each bit of it.
Nearly half the homes in the U.S. use natural gas for heat, and they could pay an average $746 this winter, 30% more than a year ago. Those in the Midwest could get particularly pinched, with bills up an estimated 49%, and this could be the most expensive winter for natural-gas heated homes since 2008-09.
In Indiana, NIPSCO has already asked the Indiana Utility Regulatory Commission to approve a 17% rate hike for natural gas.
The second-most used heating source for homes is electricity, making up 41% of the country, and those households could see a more modest 6% increase to $1,268. Homes using heating oil, which make up 4% of the country, could see a 43% increase – more than $500 – to $1,734. The sharpest increases are likely for homes that use propane, which account for 5% of U.S. households.
“After the beating that people have taken in the pandemic, it's like: What's next?” said Carol Hardison, chief executive officer at Crisis Assistance Ministry, which helps people in Charlotte, North Carolina, who are facing financial hardship.
She said households coming in for assistance recently have had unpaid bills that are roughly twice as big as they were before the pandemic. They're contending with more expensive housing, higher medical bills and sometimes a reduction in their hours worked.
“It's what we know about this pandemic: It's hit the same people that were already struggling with wages not keeping up with the cost of living,” she said.
To make ends meet, families are cutting deeply. Nearly 22% of Americans had to reduce or forgo expenses for basic necessities, such as medicine or food, to pay an energy bill in at least one of the last 12 months, according to a September survey by the U.S. Census Bureau.
“This is going to create significant hardship for people in the bottom third of the country,” said Mark Wolfe, executive director of the National Energy Assistance Directors' Association. “You can tell them to cut back and try to turn down the heat at night, but many low-income families already do that. Energy was already unaffordable to them.”
The biggest reason for this winter's higher heating bills is the surge in prices for energy commodities after they dropped to multiyear lows in 2020.
Demand has simply grown faster than production as the economy roars back to life following shutdowns caused by the coronavirus.
Natural gas in the United States, for example, has climbed to its highest price since 2014 and is up roughly 90% over the last year. The wholesale price of heating oil, meanwhile, has more than doubled in the last 12 months.
Another reason for the rise is how global the market for fuels has become. In Europe, strong demand and limited supplies have sent natural gas prices up more than 350% this year. That's pushing some of the natural gas produced in the United States to head for ships bound for other countries, adding upward pressure on domestic prices as well.