Winter Heating

Ed Gordon talks with two energy experts about what is — and is not — being done to prepare Americans for winter.

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ED GORDON, host:

We're joined now by Phil Flynn, a leading energy market analyst with Alaron Energies. He heads their futures brokerage division. He joins us from Chicago. And with me in our Washington, DC, studio is Mark Wolfe, executive director of the National Energy Assistance Directors Association.

I thank you both for joining us. Mr. Wolfe, let me start with you. We heard the dire straits that many people are going to be in in Farai's piece just a few moments ago. We should note, as you pass me a note here, the governor of Pennsylvania has announced $23 million for energy assistance within the state. That being said, as we look at all of this and you speak on the Hill quite often, does Washington understand the dire straits that many people are going to face this winter?

Mr. MARK WOLFE (Executive Director, National Energy Assistance Directors Association): Ed, in a sense they do. We've had, you know, very strong bipartisan support for energy assistance over the years. This year, we had over 40 senators sign a letter calling for an additional $1.3 billion. We've also had 28 governors that have signed a letter calling for a similar amount. Recently there were about 50 senators that voted for an amendment in the Senate to add $3 billion, but it was defeated on a procedural move. There's a lot of interest. And sadly, or interestingly enough, every day gets colder, there seems to be more interest. But we're running into, you know, large deficits. We're also running into almost kind of an unreal sense on the Hill. You know, they know they have an energy assistance program, but we keep saying, `Look, it's just not going to work this year, there's not enough money in it. The program's been eviscerated by these high energy prices and we need additional funding.'

So it's--I think the other thing to add is that there's a certain waiting going on. The expectation is that additional funding will be provided as part of the second supplemental that's coming through Congress to deal with the fallout from the hurricanes in the Gulf. So it's more that everyone tells you we're getting more money; the issue is how much and when.

GORDON: Phil Flynn, thanks for coming back. We had you on not long ago talking about the price at the pump. Now we're talking about heating homes and the like. We keep hearing the sky is falling, the sky is falling. How much of this do you believe--in your expertise, do you believe to be true, what we're hearing--double, tripling bills of last year?

Mr. PHIL FLYNN (Alaron Energies): I think it's a very strong possibility. I mean, you just have to look at what's happening in the futures markets. We're already seeing prices that have hit historic highs. And we have had an event in the Gulf of Mexico with these storms that has been unprecedented in the world energy market. So there's no doubt that we're going to see prices substantially higher. Our only hope that prices will stay somewhat under control this winter is if we get a very mild winter. And so we have to hope that this winter is not going to be as cold as some people are predicting it may be.

GORDON: If we don't see, Mark, the assistance program kick in enough money, we are really looking at, as we heard in Farai's piece, people--I talked to a woman on Saturday who suggested to me already she is looking at the idea of cutting her meds in order to heat her home. As we heard, now states allowing utility companies to cut heat off altogether where before there was a moratoria that suggested that they could not do that. It is a situation that perhaps the country hasn't put its arms around altogether, don't you think?

Mr. WOLFE: Oh, I agree. It's something that's happened very quickly. You have to remember, up to about three years ago energy was a bargain in this country. Most people could afford it. We got to a point in the Energy Assistance Program where the number of families had dropped to about three million. That was an all-time low. And there were even discussions in Congress about ending the program. Then prices started moving up again and we've gone from a period where four years ago, you could heat your home in the Northeast for about $600. Energy was basically a bargain. This coming winter we're looking at prices of anywhere up to $1,800 to $2,000. So we've gone from a point where the average American, the average working family could pay their energy bill; now we're looking at a point where for many Americans energy is just plain unaffordable. It just--it can't work. If you have an income of maybe $15,000, $20,000 a year and your heating bill alone is $2,000, that's 10 percent of your total income. And this comes on top of rising gasoline prices. So the average family, if you go back even a year, gasoline cost about $1.80 a gallon. Right now we're in the $3 range. Heating oil was $1.80 a gallon also. In the Northeast, they're reporting numbers of up to $2.65 a gallon. So those kinds of numbers alone are enough to give an awful lot of Americans pause in how are they going to pay these bills this coming winter.

GORDON: And, Phil Flynn, we can't stress enough, and you talked about this when we talked about the price of the pump again when you were on with us before, but the idea of the domino effect, how this will affect other aspects and areas of the economy.

Mr. FLYNN: It really can. And we've already seen some stress on the market. Alan Greenspan, of course, has addressed it the recent days. There's no doubt that this could be the Grinch that stole Christmas, you know, excuse the pun, because it could affect consumer spending and pretty much hurt the economy right across the board. So this is a major, major issue. And I think Mark made a great point. I mean, for years, energy prices were cheap in this country; we basically took them for granted and we almost developed an anti-energy policy in this country, not only, you know, energy was cheap, we don't need to drill for it, we don't need to explore. We're paying the price for that lack of foresight now.

GORDON: Mark, real quick, any ideas in terms of whether or not we'll see altruism in the sense of wanting to help from utility companies who may cut a break to consumers this year?

Mr. WOLFE: We're seeing some move by utilities to loosen up on down payments, to loosen up on credit terms. But the real problem here is that utilities don't make any money on energy itself, they make money on delivery of fuel. The real profits are with the producers. What we're going to have to see are two things. One, more state action, like we just saw in Pennsylvania today, but also this is a federal problem, ultimately. And, you know, we're--basically the federal government has to step up and significantly increase funding. And we're looking at, you know, getting the program fully funded at the $5.1 billion that's authorized under the Energy Policy Act.

GORDON: How realistic is it to believe that that will happen?

Mr. WOLFE: It's a tough sell. I think it's realistic to believe we'll get at least another billion dollars.

GORDON: Phil, 30 seconds remaining. The idea of whether or not this is going to be the norm for us--prognosticate for us, if you will.

Mr. FLYNN: It could be. I mean, we need to--I think the Bush administration made some rules to make it easier to drill on some lands today, are trying to push that through. This--listen, we need to fund the heating program for this year, but it's a short-term solution. We also have to work on the long term, and that means more production.

GORDON: All right. Phil Flynn of Alaron Energies and Mark Wolfe of the National Energy Assistance Directors Association, I thank you both for joining us. Greatly appreciate it.

Mr. FLYNN: Thanks.

Mr. WOLFE: Thank you.

GORDON: This is NPR News.

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