Washington, DC�US Energy Sec. Bill Richardson said Thursday he is "very concerned about stocks" of distillates needed to heat homes in the Northeast next winter.
Richardson met Wednesday with heating oil distributors and congressional staff about the Clinton administration's plan to create an interim 2 million bbl distillate stockpile in the Northeast by October. Participants said Richardson urged them to build distillate stocks, and there was give-and-take about how the distillate reserve would be used.
Richardson told reporters Thursday, "I assured them the home heating oil reserve would only be used for emergency purposes and not price manipulation."
The secretary said he has created an interagency task force to examine the means of removing transportation bottlenecks for home heating oil. A similar task force was established to explore ways to improve natural gas storage before winter.
Richardson told a Senate agriculture subcommittee hearing that diesel and home heating oil are nearly the same petroleum product.
"We are concerned about heating oil supplies for the upcoming winter. We need to build stocks, so this is creating some price pressure on diesel, which affects our nation's farmers and truckers."
He added that prices for diesel are beginning to drop slightly.
During the hearing, former Energy Sec. James Schlesinger dismissed a 2 million bbl stockpile as "trivial." He explained, "It is a gesture, but it will not significantly affect the market."
Richardson could not clarify whether Organization of Petroleum Exporting Countries nations would further increase oil production in the next few weeks.
Saudi Arabia proposed in July that OPEC increase output another 500,000 b/d. But after the price of the basket of crudes that OPEC uses to monitor prices fell below $28/bbl, the OPEC president said a production increase was unnecessary to restrain prices.
Saudi Arabia is expected to begin producing another 250,000 b/d in August, anyway.
Richardson said, "It is clear that the world needs more oil" and the market is not being helped by "confusing" signals about production from OPEC members. He added, "Saudi Arabia has shown a lot of leadership on the issue of more production. Hopefully the rest of OPEC will follow suit."