Congressmen seek heating oil price relief

Feb. 28, 2000
Home heating oil prices in the northeastern US remain a concern for Congress and the Clinton administration.

Home heating oil prices in the northeastern US remain a concern for Congress and the Clinton administration.

Last week, members of Congress continued to urge the Department of Energy to release crude oil from the Strategic Petroleum Reserve (SPR). They are pushing legislation to create a home heating oil reserve in the Northeast. And they have asked the Department of Justice to determine if antitrust violations contributed to the heating oil price jumps last month.

Energy Sec. Bill Richardson reiterated that the administration would not release SPR oil to mitigate price fluctuations. But he announced several actions to ease distillate supply problems.

Oill Reserve

Rep. Bernard Sanders (I-Vt.) charged the Clinton administration has failed to respond adequately to the distillate price increases. Sanders said 50 other House of Representatives members have cosponsored his bill to create a 2-million-bbl home heating oil reserve in the Northeast.

"We want to make certain that the huge increase in home heating oil prices that we have recently seen never happens again. This bill to create a permanent home heating oil reserve is a cost-effective way of making sure that the government has a mechanism to lower oil prices when global situations cause them to rise."

The bill would require DOE to lease storage in New York harbor for a 2-million-bbl stockpile. An SPR cavern on the Gulf Coast would be used to store another 4.7 million bbl of home heating oil.

In a 1998 study, DOE concluded a regional distillate reserve would be economic only under very narrow conditions (OGJ, Aug. 3, 1998, p. 26). Sanders says his bill falls within those parameters.

Meanwhile, 43 House members have urged Atty. Gen. Janet Reno to order a justice department investigation of the price increases.

The letter to Reno said, "We are concerned that these prices do not accurately reflect the actual cost of the product. In fact, we are worried that the prices charged along the supply line are being artificially manipulated to take advantage of the severe weather and increased demand by consumers.

"While we understand and appreciate that there are many factors that can influence the cost of oil, the current situation is having a severe impact on our constituents, forcing many to choose between heating their homes and providing food for their families."

The members of Congress said that, as of Feb. 7, the price of wholesale spot heating oil in the Northeast was more than $1/gal higher than in other US regions.

Complaints, response

The northeastern congressional representatives continue to urge the administration to release SPR crude immediately, although Vermont Rep. Sanders admitted that the crude could not be sold and refined, and products shipped to market, before spring.

He said, "In 1991, in the midst of the Gulf War crisis, President George Bush announced that he was releasing a small amount of oil from the SPR, and the next day, the price of crude dropped $10/bbl. Organization of Petroleum Exporting Countries producers and others got the message that less-expensive oil was coming onto the market, and they responded accordingly."

The members of Congress said the administration should release all of the emergency funds available to the Low Income Home Energy Assistance Program (LIHEAP).

The administration has released only $175 million of the $300 million in the emergency fund, and two-thirds went to all 50 states under a nonemergency formula. Any additional LIHEAP funds should be earmarked for the Northeast, the only region experiencing major fuel price increases, they said.

Rep. John Larson (D-Conn.) said he would file a bill to require DOE to sell SPR crude if oil prices stay above $25/bbl for 2 consecutive weeks.

Sec. Richardson announced several more actions in response to the home heating oil problems. He said the US Department of Health and Human Services will release $130 million in emergency LIHEAP funds. Of that, $44 million would be targeted for New York and the New England states, and the rest would be distributed around the nation.

The administration had released $45 million in emergency funds earlier.

Richardson said the Small Business Administration would make loans available for heating oil distributors to help them meet contractual obligations and make deliveries.

The administration plans to facilitate waivers enabling distillate truck drivers to work extended hours.

DOE will work with states on a case-by-case basis on possible short-term Clean Air Act waivers that could add to the quantity of available fuels. It plans to urge oil companies to defer routine maintenance at refineries "so that heating oil production is at full throttle until the home heating oil crisis has passed."

The Paper, Allied-Industrial, Chemical and Energy Workers Union (PACE) blasted Richardson for this remark. PACE Executive Vice-Pres. Robert E. Wages said, "Delays in scheduled maintenance in an industry that already stretches its maintenance schedule to the outer limit poses an imminent danger to all involved."

DOE will urge eligible utilities to switch from heating oil to natural gas. And the Energy Information Administration will study the impact of interruptible gas contracts on home heating oil supplies.

DOE also plans to re-establish an energy emergency office to plan and coordinate product shortage responses with affected states. And DOE and the US Coast Guard will create a product movement task force to prioritize heating oil shipments at terminals and clear harbors and rivers of ice.