State officials acknowledged Wednesday there is little the state can do to contain the soaring home-heating expenses expected this winter and urged residents to act now to protect their wallets.
"Take action now. The best defense is conservation and efficiency," said Peter Smith, president of the state Energy Research and Development Authority, a state agency that monitors energy costs.
Smith told an Assembly Energy Committee hearing in Albany Wednesday that federal officials have already forecast a 31 percent rise in home-heating costs and a 32 percent hike in natural gas expenses over last year in New York -- increases that could go higher depending on the market effects of Hurricane Katrina.
Meanwhile, with motor fuel prices starting to slowly drop, officials said New York is in no danger of running short of gasoline, even though 50 percent of the state's supplies come from Gulf Coast refineries.
Still, the cost of fueling up in New York -- at $3.29 per gallon on average Wednesday according to Oil Price Information Service -- is second in the nation, trailing only Hawaii. Mississippi, at $2.64, has the lowest per gallon price.
The sky-high fuel costs have some lawmakers demanding action by the state. The State Senate is due back in Albany next week, at which time it could approve legislation to lower the state sales tax on gasoline.
But one energy expert warned lawmakers that such a move would backfire on consumers. Kajal Lahiri, a distinguished professor of economics at the State University of New York at Albany, said a political response of cutting the sales tax would only increase consumption by drivers in the state -- which, in turn, would affect supply and drive up prices.
"Then you are in a vicious cycle of additional price increases. The only way prices will come down is if demand falls," Lahiri said.
The Assembly Energy Committee hearing was the first of several planned by lawmakers to examine why automobile fuel prices rose so rapidly after Katrina and what looms on the horizon for this winter's home-heating costs.
"Going forward, the outlook for this winter is our main concern," Smith told lawmakers Wednesday.
Joseph Ash, a vice president at Niagara Mohawk, told lawmakers that the utility's residential consumers can expect to see a 35 percent increase in heating bills this winter over last year. The prediction, though, can be affected by everything from wholesale markets to the severity of the winter.
Last winter, home-heating oil began the winter at an average of $2.08 a gallon in New York, rising to $2.25 a gallon in March, according to NYSERDA, the state agency. Higher crude oil levels will drive those costs up by about one-third, Smith said, according to preliminary estimates by the federal government. The state will hold its own forecasting session at a meeting in mid-October, when the home-heating cost situation will become clearer.
Officials say hardest hit will be elderly and low-income people who are least able to afford the big hit on a commodity they can't do without. Lawmakers say they already are looking to boost funding to a state energy assistance program. Smith said the Pataki administration is working on a plan to address the looming crisis.
Smith said consumers should act now to help lower their own heating costs -- whether by cleaning furnaces or making homes more airtight. He called efforts to increase funding to the state energy assistance program for low-income New Yorkers a "Band-Aid approach." Instead, he said, consumers would save more by improving home energy efficiency.
The state government is taking in millions more a day in higher gas taxes. Yet, the energy cost of running government is soaring.