Heat on Richardson

US Energy Sec. Bill Richardson's diplomatic skills came to the forefront in the recent home heating oil price crisis.

US Energy Sec. Bill Richardson's diplomatic skills came to the forefront in the recent home heating oil price crisis.

Richardson has experience as a hostage negotiator and served as US ambassador to the United Nations. He did as much as anyone could to assuage New Englanders furious over home heating oil price increases (see story, p. 32).

Price spikes aren't unusual when winter storms halt transportation in the Northeast, but the public's reaction always seems to be the same: If prices are sharply higher, then oil companies must be gouging consumers.

There really was no simple answer. Frozen harbors, higher world oil prices, interruptible gas supply contracts, and low inventories all played a role.

But politicians saw a simple solution: flood the market with Strategic Petroleum Reserve crude to drive oil prices down.

Steady message

The secretary's reply was steadfast: the SPR was created for oil supply shortfalls, not product price disruptions.

The redoubtable Alan Greenspan, the Federal Reserve Board chairman, also lent his support.

Greenspan warned, "It would be a mistake to move market prices by making small additions or subtractions from the [reserves]. It's foolish to believe we could have a significant impact, short of a major liquidation of that reserve.

"The longer-term trends are gradually going to take care of this problem better than anything we can do."

Richardson's response to the New England crisis was a barrage of 20 actions that create the illusion that the government is working on the problem (even though the problem is really unsolvable through government action). DOE and other agencies will create offices and task forces, perform studies, reduce regulations, hold meetings, release emergency funds, and such.

The tactic was reminiscent of DOE's programs to help producers through the oil depression a year ago. They were ineffectual, except to show the government's concern.

Boston hearing

Richardson was a model of calm and concern at a Boston "summit" on the heating oil problem.

He readily admitted the federal government was ill-prepared but deftly brushed aside radical proposals like one from Sen. Edward Kennedy (D-Mass.) to set minimum stock levels for refiners and wholesalers.

The National Petrochemical & Refiners Association said the crisis should prompt the US to rethink its fuels policies.

"For too many years we have consciously or unconsciously followed a national policy which doesn't pay sufficient attention to the question of supply," said NPRA. "Often, we have pursued overly expensive environmental restrictions without looking for equally effective but less costly alternatives. The inevitable result is the situation that we confront in the Northeast, which will likely recur if these policies are not changed."

John Felmy, the American Petroleum Institute's chief economist, hinted some blame is due New Englanders who opposed pipelines and refineries in the past. He said New England is not served by a products pipeline, noting that "cold weather doesn't affect pipelines as it does barges."

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