By OGJ editors
HOUSTON, Feb. 7 -- The New England Fuel Institute, a coalition of fuel oil delivery companies, sent US Energy Sec. Spencer Abraham a letter requesting a release from the Northeast Heating Oil Reserve to help ease spiraling prices.
The coalition blamed rising retail heating oil prices on the possibility of a war with Iraq, a cold winter, a drop in Venezuelan oil exports, and refineries shutting down for routine maintenance.
"The confluence of all these factors and perhaps some overall pessimism that is prevalent in today's economy has produced a supply and pricing crisis that deserves to be addressed," the New England Fuel Institute said in its letter.
Former US President Bill Clinton ordered the establishment of a 2 million bbl reserve that holds emergency heating oil in four terminals in the Northeast between New Jersey and Rhode Island.
In a separate research note, the Petroleum Industry Research Foundation Inc. of New York acknowledged that rising heating oil prices would result in pressure to release supplies from the heating oil reserve.
"Despite the dramatic run-up in retail heating oil prices over the past 2 months of nearly $11/bbl (to $1.56/gal on Feb. 3 from $1.30/gal on Dec. 2 ), we are nowhere near the differential required to trigger the reserve," PIRINC said.
"The required difference for formal release is substantially higher than the actual difference. Retail prices would have had to have been 39¢/gal higher, or $1.95/gal rather than $1.56/gal, for the threshold to have been reached," PIRINC said.
The Energy Policy and Conservation Act of 2000 authorizes the US President to authorize a release if there is a dislocation in the heating oil markets or if a regional supply imbalance creates a negative impact that would be improved by a reserve release.
The law defines a dislocation as occurring when the price differential between crude oil and the residential price of heating oil in the Northeast exceeds 60% of its 5-year monthly moving average price for 7 consecutive days, and when the differential continues to increase for the most recent week for which price information is available, PIRINC said.
