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How to Succeed 2006: Energy forecast
Relief at the pump, but not at home.
November 15, 2005: 9:07 AM EST
By Pat Regnier, MONEY Magazine
Succeed in 2006
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NEW YORK (MONEY Magazine) - Even if you drive a hybrid, energy prices are going to be a big part of your life in 2006.

After hurricanes Katrina and Rita, gas hit $3 a gallon. The fact is that the age of cheap gas isn't coming back soon, but we may have seen the worst of the spikes.

Prices have declined recently, as the oil industry recovers from hurricane damage. Also, demand may slacken if we continue trading in SUVs for compacts.

That won't be the only adjustment you'll make in the coming year. Think sweaters. "Around the end of November, people may be getting their first real cold-weather heating bills, and they could be 50 percent higher," says Sarah Emerson of Energy Security Analysis.

Heating oil costs are up, and natural gas prices have jumped 50 percent in a year. High natural gas prices in particular may be with us for a while.

Until recently, North American supplies easily kept pace with demand, says Neal Schmale, chief financial officer at Sempra Energy. No longer. And though there's still plenty of gas overseas, the stuff needs to come in through special terminals, which take time to build and often aren't popular with their would-be neighbors.

Emerson warns that some consumers will feel a "triple whammy": first gasoline, then heating costs, then electric bills.

In places where power plants use natural gas, including New England and Southern California, utilities are talking about 10 percent to 30 percent increases in bills.

Nationally, though, electricity prices will rise less because much of the country's juice comes from coal or nuclear power. Spending more on driving and heating and powering your plasma-screen TV means spending less on everything else -- it may even mean you'll pass on the TV.

This should put a damper on the economy. But energy costs could also trigger a return to spiraling inflation. Any company that's spending more on its own energy costs will try to pass those costs on to customers if it can. FedEx just did, citing rising fuel prices.

How big is the risk of inflation? It depends, in part, on wages -- and there the bad news and the good news are jumbled together. (See inflation forecast)

See 33 moves to make in 2006.  Top of page

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