Heating oil, natural gas, and politics

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Monday July 10 6:40 PM ET

Clinton Wants Heating Oil Reserve

By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON (AP) - President Clinton moved Monday to stockpile 2 million barrels of heating oil in the Northeast as politicians, eying the November election, looked for political cover in event of a repeat of last winter's sharp price spike in home heating costs.

Heating oil stocks are alarmingly low for this time of year as refineries concentrate on pumping out as much gasoline as possible, raising concern of another supply crunch in the Northeast.

At the same time, the price of natural gas, which heats about half of the nation's homes and is the primary heating fuel in the Midwest, has doubled during the last year, causing many economists to predict higher heating costs this winter across much of the country just as voters head for the polls.

In remarks to reporters, Clinton criticized the Republican-led Congress for failing to pass legislation creating a Northeast heating oil reserve.

``Time is running out,'' Clinton said, explaining why he was acting by executive order. '' ... If we don't do something now, reserve stocks of heating oil may not be in place before the cold weather comes.''

Several GOP governors from the Northeast suggested the president was thinking more about politics than heating concerns and questioned why he did not create such a reserve long ago as Northeast lawmakers have been demanding.

``This can only be a political response because of the pressure put on Al Gore (news - web sites),'' speculated New Jersey Gov. Christine Whitman, who has been mentioned as a possible running mate for Texas Gov. George W. Bush (news - web sites).

But Democratic governors applauded the move. ``New England is too dependent on heating oil and diesel to tolerate the price volatility we saw last winter,'' said New Hampshire Gov. Jeanne Shaheen.

While the peak heating season does not start until after November, many suppliers begin stockpiling fuel in the fall, when wholesale prices may already begin to go up if there are signs of impending shortages, energy experts said.

There are 37 million barrels of heating oil in inventory, about half as much as last year at this time, said Gene Sperling, the president's chief economic adviser. He said the administration also was concerned about the rising natural gas prices.

While prices have declined since last winter, wholesale heating oil is selling for 84 cents a gallon, compared with 51 cents last summer when stocks were high, the Energy Information Administration says.

Natural gas prices, meanwhile, have doubled to their highest levels in more than decade, averaging over $4 per thousand cubic feet, compared with $2.12 a year ago, the EIA says. Even if there isn't unusually cold weather, the price is predicted to go to $4.33 by December, causing many economists to anticipate sharply higher heating prices.

To address the heating oil problem, Clinton directed Energy Secretary Bill Richardson to trade oil from the government's Strategic Petroleum Reserve for 2 million barrels of refined heating oil that will be put into Northeast storage tanks. Officials said the goal is to have the fuel in place within 90 days.

The American Petroleum Institute, which represents the large oil companies, expressed concern that the reserve ``could divert home heating oil needed to build inventories'' in the coming months. Administration officials discounted such concerns, saying the amount needed for the reserve was small compared to overall supplies. Sperling said the 2 million barrel amount was selected as a ``delicate balance'' between providing a safety cushion, while not disrupting private fuel stocks.

However, senior administration officials said that without congressional action, the fuel will not be available except for a ``severe energy disruption'' nationwide. Clinton urged Congress to pass legislation formally authorizing the reserve and establishing a trigger for the fuel's use in case of price spikes or local supply problems.

Last month, the House passed legislation that included authorization to create a Northeast reserve to be used in case of heating oil price spikes, but the Senate has not taken up the measure.

Just as skyrocketing gasoline prices thrust energy issues into the presidential campaign this summer, any surge in heating oil or natural gas prices this fall could become a problem for Al Gore's presidential campaign, political analysts have said.

The winter heating crunch would hit hardest in the states Gore considers pivotal if he is to defeat Bush: New York and Pennsylvania in the Northeast and Illinois, Michigan and Ohio in the Midwest.

Hillary Rodham Clinton raised the issue in her high-profile New York Senate race, criticizing her GOP opponent, Rep. Rick Lazio, for missing the House vote on the heating oil reserve.

Republicans have long criticized the Clinton administration of being unprepared for last winter's heating oil price surge. Richardson said in February that the government, and everyone else, had been caught ``napping.''


On the Net:

Energy Information Administration: http://www.eia.doe.gov

-- Recently (in@the.news), July 20, 2000

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