Dearth of Heating Oil Spells Problems for Connecticut

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Dearth of Heating Oil Spells Problems for Connecticut

Source: Knight Ridder/Tribune Business News Publication date: Jan 25, 2000

(By David Hammer, Waterbury Republican-American, Conn. )

Jan. 25--Sen. Christopher J. Dodd, D-Conn., called the state's heating oil shortage and the resulting hike in prices "very serious" Monday.

The last time Dodd's office received so many concerned calls, letters and e-mails, they were about impeaching the president.

Desperate times call for desperate measures, so Dodd sent a letter to President Clinton on Monday, asking him to dip into a $300 million energy crisis fund to help Connecticut residents and requesting emergency shipments from the nation's Strategic Petroleum Reserve to keep the state's independent suppliers from running out of oil completely.

The state's oil supply crisis began in earnest Saturday when one of central Connecticut's main suppliers, Motiva Enterprises LLC, told East Hartford officials that it could run out of oil by midweek. Reduced oil shipments, market pressures and panicked customer hoarding made the situation more critical by Monday.

Heating oil prices, which dropped as low as 80 cents per gallon in Connecticut last year, are now up near $2 a gallon in Fairfield County and around $1.65 in Waterbury. Dodd said low- and fixed-income residents have been hit hardest by the difficult-to-control oil price-hikes, which is why he has asked for help from the Low Income Home Energy Assistance Fund.

On top of asking for aid from the Strategic Reserve, Dodd reinstated a 1996 request for the creation of a less drastic regional reserve. He said the Department of Energy has "given all kinds of lame reasons why we cannot" start a regional reserve.

The Energy Secretary in 1996 was Hazel O'Leary. Current Energy Secretary Bill Richardson has stood firm against selling oil from the reserve simply because prices are high. Dodd is hoping the low supply in Connecticut will be considered more of an "emergency."

If a portion of the national reserve, which contains a month's supply of crude oil, were to be released to Connecticut suppliers, it would need to go through a refining process that could take weeks, according to Roger Boucher, president of Wesson Energy Inc., the Waterbury area's largest oil distributor. Dodd said just having the reserves at the ready would allow local suppliers the confidence to sell their depleted supply and, in turn, would stabilize prices.

Boucher said rising costs are a pure reflection of high demand and low supply. Although Motiva is a major supplier for Wesson, Boucher said the Waterbury firm is "well-positioned" with a variety of New Haven-based suppliers and in no danger of running out of oil to deliver.

Boucher said the greatest danger was a tendency among customers to hoard oil in an attempt to "beat the market." He said customers have been "panicking" and calling Wesson all weekend asking to get their tanks filled up in case the suppliers run totally dry. This kind of hoarding could create a supply problem where one did not exist, Boucher said.

Dodd allowed that his activism could promote hoarding, adding to the "panic situation" described by Boucher, but the senator said he could not ignore his constituents' pleas for help.

The oil markets have been ignited by crude oil prices near $30 per barrel, ravenous speculators on the commodities and mercantile exchanges and an over-reliance on a limited natural gas supply. "Natural gas companies sell to big corporate consumers and when it gets extremely cold, they have to switch over to heating oil if there isn't sufficient gas," Boucher said. "So there's new demand in the corporate sector when the heating oil would normally be mainly for home owners."

Cutbacks by the Organization of Petroleum Exporting Countries have tried American suppliers' nerves for months, and now OPEC has threatened to keep the cap on imports through March.

But Dodd felt the real source of the problem was poor planning. He said oil supply was set based on last year's mild winter so that suppliers were unable to handle increased volume during this month's extended cold snap.

Crude oil prices are their highest since the Persian Gulf War of 1991. Richardson said he will discuss the rising prices this weekend with foreign oil ministers at a world economic conference.

Link to story: http://beta.newsreal.com/cgi-bin/NewsService?osform_template=pages/newsrealStory&ID=newsreal&storypath=News/Story_2000_01_26.NRdb@2@8@3@441&path=News/Category.NRdb@2@7

-- Carl Jenkins (Somewherepress@aol.com), January 26, 2000

Answers

If Dodd is really serious about a solution for heating oil problems -- and not just sounding off for his constituents -- then he should consider sponsoring a tax code ammendment that would allow stockpiling of heating oil over the Dec 31-Jan 1 rollover every year.

The current tax code penalizes dealers, distributors, and major oil comanies for holding stockpiles.

Come to think of it, perhaps the tax code shouldmandate a full month's reserve, beginning every January 1, for each dealer and distributor.

-- rocky (rknolls@no.spam), January 26, 2000.


How about a tax cut, so people can afford to buy heating oil? Is that out of the question? /

-- Earl (earl.shuholm@worldnet.att.net), January 26, 2000.

Can you imagine the paperwork that such an inventory tax exemption would lead to? And the additional auditors to police it? Oh, I forgot, an awful lot of that heating oil wuld not be actually stored in that state. Oops!

Let's see, Dodd is still toeing the Demo party line, isn't he? Spin!!!

Yes, it is easy to sit here in Ohio cracking comments like the above. I certainly do not envy Dodd's constituents, especially the elderly and very young. My prayers go out to them.

-- Redeye in Ohio (cannot@work.com), January 26, 2000.


I'll bet folks who installed an extra (oil) tank or two as part of their Y2K preps are feeling pretty smug right now. Whether its filled with heating oil, kero, or heating/kero mix - its a nice cushion to have if you rely on home delivery.

jh

-- john hebert (jt_hebert@hotmail.com), January 26, 2000.


I have been very carefully going out and patting my tank farm on the way to work every day. Haven't cracked it but I Do like to see it out there.

Chuck

-- Chuck, a night driver (rienzoo@en.com), January 26, 2000.



The Klintoon Administration, normally being one to jump at a politically popular grandstanding move *does not* want to open the Strategic Petroleum Reserve because it "needs to be held for a real emergency". Ummmmm.... do they see something in their crystal ball that the "doomer prophets" have been seeing for a while now?

I don't feel very good about this one. I do believe that the oil situation just might produce all the pucker factor that we ever wanted to attribute to Y2K.

WW

-- Wildweasel (vtmldm@epix.net), January 26, 2000.


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