DOE Says Only One-Third of Emergency Oil Will Be Additional Supplies

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Oct 6, 2000 - 07:53 PM

DOE Says Only One-Third of Emergency Oil Will Be Additional Supplies By H. Josef Hebert Associated Press Writer

WASHINGTON (AP)- Only about a third of the 30 million barrels of oil being released from the government's emergency reserve will result in additional oil going to refineries, an Energy Department report acknowledged Friday.

The rest will displace 20 million barrels of imported oil that refineries will not buy because of the availability of the government oil, said the winter fuels report issued by the department's Energy Information Administration.

Mark Mazur, the statistical agency's acting administration, said the 10 million barrels in additional oil to refineries is still expected to produce 3 million to 5 million barrels of heating oil and diesel fuel, the number that administration officials have cited throughout.

While oil inventories remain low at about 290 million barrels, or 17 million barrels below levels a year ago, the EIA report said stocks are expected to increase somewhat between now and winter.

On Sept. 22, President Clinton directed that 30 million barrels be taken from the government's Strategic Petroleum Reserve to ease expected problems in the supply of winter heating oil. The Energy Department announced Wednesday the 11 companies and brokers who will be given the oil under a "swap" arrangement for future oil.

All deliveries are to be completed by the end of November.

Refineries are expected to buy all 30 million barrels, since they may get it at a cheaper price than oil coming in through imports, energy experts said. The government oil is expected to displace an estimated 20 million barrels of imports that now will not go to the U.S. refineries, according to the EIA analysis.

The refineries "just won't purchase other oil that they might have otherwise purchased" from foreign sources. Mazur said that the 10 million barrels of additional oil, nevertheless, is expected to produce 3 million to 5 million more in additional distillates, both heating oil and diesel fuel.

Oil industry representatives, and some Republican members of Congress, have questioned whether refiners, who recently have been running at up to 96 percent capacity, will be able to absorb an additional 30 million barrels.

"How much additional crude they could actually be able to run through has always been unclear," said John Felmy of the American Petroleum Institute, the trade group for the major oil companies.

Energy Department officials as well as some members of Congress expressed concern that refiners may be exporting heating oil to Europe, where the supply crunch is even more severe and prices are higher.

Mazur said analysts are puzzled why refineries are operating at top capacity but inventories of heating oil is remaining low, and he did not rule out that some heating oil may be being exported.

Sen. Frank Murkowski, R-Alaska, chairman of the Senate Energy Committee, said such exports may blunt the impact of oil from the government reserve.

Murkowski, who has been critical of the decision to use the emergency oil, said he was concerned that "we are going to release oil from our (reserve) to provide product for a European market."

Energy Secretary Bill Richardson said this week he is optimistic that refineries can handle enough additional oil to produce the expected 5 million additional barrels of heating oil and diesel this winter.

Traditionally refineries make slight cuts in production at this time of year for maintenance before shifting away from gasoline to distillate production in anticipation of the winter heating season.

Richardson has said he would like to see some of the refiners postpone some maintenance and keep capacity at high levels through October. In some cases that might be difficult, said Felmy, because of maintenance contracts and other factors.

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-- Carl Jenkins (Somewherepress@aol.com), October 07, 2000

Answers

I remember when Ronald Reagan wanted to dismantle this collection of nincompoops. DOE is another example of featherbedding and incompetance. I've never seen so many lame excuses. Now they're selling our oil overseas.

-- David williams (DAVIDWILL@prodigy.net), October 08, 2000.

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