Dwindling Supply Adds To State's Oil Crunch

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Interesting quotes from report below include:

"We used to call it rationing. The new word for the `90s is allocating,'' Lipman said. "We've been in business since 1979, and never before have we been allocated."

"What's happened this year, which I've never seen before, is price spikes in the middle of the day. That's happened this year," Deitch said.

Dwindling Supply Adds To State's Oil Crunch

By SUSAN E. KINSMAN The Hartford Courant February 04, 2000

First it was skyrocketing prices. Now it's dwindling supply, coupled with high prices, that has Connecticut heating oil dealers worried. Deliveries are still being made to retail customers, but they may not be getting their tanks filled, or as much oil as they want. And anyone who has had an oil delivery recently is shocked by the price - double or triple the price per gallon a year ago. Continued cold weather and an unwillingness by dealers and suppliers to stock up at high prices crunched supplies in Connecticut this week.

Area dealers report having their trucks turned away for the first time ever from oil terminals in East Hartford and Wethersfield, or being forced to drive across the state to New Haven to fill up.

At least 10 million gallons of heating oil were offloaded in New Haven Thursday, and another tanker carrying 9 million gallons was expected to be pumped out Thursday night.

The deliveries were part of an estimated 22 million gallons of heating oil expected in the state before the weekend, said Charles S. Isenberg, executive vice president and chief executive officer of the Independent Connecticut Petroleum Association.

But the promise of supplies arriving today did not make it any easier Thursday.

"Until now, I have had no problems with supply. But now, it's directly affecting me," said Robert S. Lipman, president of Lipman Oil Co. in Newington, which operates 11 trucks for its nine companies.

The company's supplier, Northeast Petroleum, limited the amount of oil Lipman could buy to 6,000 gallons, on a day when it typically could have used 40,000, Lipman said.

"We used to call it rationing. The new word for the `90s is allocating,'' Lipman said. "We've been in business since 1979, and never before have we been allocated."

Typically his trucks would pull into the Wethersfield terminal to top off at night to be ready to roll the next morning. "Now they are coming back empty," Lipman said.

Lipman found an alternate supplier on the other side of the river in East Hartford, Sprague Energy Corp. "Right now, we're putting all our eggs in Sprague's basket, and they are coming through,'' Lipman said.

Bruce Deitch, vice president of Kasden Fuel in East Hartford, has been in the oil business for 25 years, his family since 1910.

"What's happened this year, which I've never seen before, is price spikes in the middle of the day. That's happened this year," Deitch said.

"Years ago, if the price went up a penny a gallon, we could plan to increase our price three days ahead. Now the [wholesale[ price changes 10 cents a gallon in a day," he said.

Deitch said his company is continuing its normal deliveries. But there is nothing normal about customer bills. "People are not happy," he said.

Deitch said supply "seemed adequate" Thursday morning, but he was "extremely concerned" Wednesday afternoon. Motiva Enterprise's East Hartford terminal was still without heating oil.

Lipman said the reason for the tight supply is that "no one wants to bring in oil at this price, so there are just enough gallons in the terminal to squeak by. The price has gone up $1 a gallon in two weeks," he said.

"Otherwise when the crash comes - and it will come - you will be stuck with it at a very high price," Lipman said.

Lipman said he was burned by falling prices last winter. This year, he reduced the amount of oil he purchased by contract. All of that lower-priced contract oil is gone, he said.

Continued cold weather in the Northeast is fueling demand and keeping prices high on the New York Mercantile Exchange. Low supplies and cold weather drove heating oil prices to a nine-year high in January.

Heating oil for March delivery rose 2.37 cents, to 77.90 cents a gallon, on the exchange. The crude oil price was up 48 cents, to $28.03 a barrel.

But wholesale prices on heating oil for immediate delivery in New York Harbor were much higher, at $1.52 to $1.54 a gallon. Low-sulfur diesel fuel was selling between $1.53 and $1.55 a gallon. New Haven wholesale rack prices were even higher, averaging nearly $1.63 a gallon.

With oil supplies stretched, only reduced demand from warmer weather is expected to pull down prices near-term. Connecticut forecasts call for warmer weather, with highs near 40, on Saturday.

link

http://www.ctnow.com/scripts/editorial.dll?fromspage=CG/articles/business.htm&categoryid=&bfromind=377&eeid=1551675&eetype=article&render=y&ck=&ver=hb1.2.20



-- Carl Jenkins (Somewherepress@aol.com), February 05, 2000


Moderation questions? read the FAQ