9.19.2000 00:23 Heating oil: Making sure there's enough

With costs skyrocketing and supplies low, industry and state leaders look for ways to fatten the stores.

By BOB WYSS Journal Staff Writer

As energy prices continue to rise, worried industry and government officials are increasingly focusing on whether Rhode Island will have enough fuel this winter for everyone to stay warm.

The latest in a series of meetings on that issue was held yesterday in Warwick, a session called by U.S. Sen. Jack Reed and attended by U.S. Sen. Lincoln D. Chafee, Lt. Gov. Charles Fogarty and government and energy-industry officials.

As they conferred, the price of a barrel of crude oil nudged over $37 for the first time in 10 years, sparked by increased tensions between Iraq and Kuwait. That is the highest price since October 1990, when prices on the New York Mercantile Exchange reached $41.15 a barrel during the Persian Gulf War.

After yesterday's meeting, the state Energy Office reported that the average price of a gallon of home heating oil increased by 3 cents a gallon in the last week. The average price is now $1.509 and it has climbed 16 percent in the last four weeks.

At yesterday's meeting, Mark Mazur, of the U.S. Energy Information Administration, reported that prices will probably remain high all winter and that supplies will be very tight. A very cold winter, or even a cold snap of several weeks, could strain the low stocks of oil now available, causing price spikes and potential shortages.

"We know we can't do anything about price," said Victor Allinello, a spokesman for the Oil Heat Institute of Rhode Island, a trade organization for the retail oil dealers, because it is controlled by international markets and suppliers.

"Our biggest concern is whether the product will be available when we need it," he said.

Aides to Governor Almond held a meeting two weeks ago with energy and government officials similar to yesterday's. Almond could make a series of announcements next week about the winter heating season, Fogarty said yesterday. Clark Greene, policy director for Almond, said yesterday that he is still preparing recommendations for the governor.

Options for increasing supply are limited.

One is for the state to more closely monitor how much heating oil is available during the heating season.

The state Energy Office plans to do that, Janice McClanaghan, state energy director, reported yesterday. Her office tried to monitor supplies last February, when prices spiked to $2.10 a gallon and supplies were very short. But the monitoring had mixed success.

Planning will improve that system, she said. "Last year, we were just thrown into it," McClanaghan explained.

Heating-oil dealers are also suggesting that the state or federal government could provide tax or other incentives to increase storage in the Rhode Island area.

There are fewer tanks to store heating oil this winter, McClanaghan reported.

Two port terminals, which had a capacity of 19 million gallons of petroleum products, have closed. That leaves six terminals with about 100 million gallons, industry and government officials reported yesterday. Representatives of Capital Terminal of East Providence said at the meeting that they hope to increase storage by about 8.4 million gallons this winter. But that's still a net decrease in storage, said McClanaghan.

Even if government officials tried to convince another oil company to take over one of those terminals, it appears unlikely the company would fill the tanks to capacity. The reason inventories are low both nationally and in New England is that the price is now so high that oil companies are afraid of holding too much oil, in case prices do fall during the winter.

Plus, as much as 40 percent of the fuel at some terminals now goes to customers in other states, wholesalers reported.

Other options would be for the state to buy and store oil or for the federal government to increase its regional oil reserve. President Clinton started the reserve this summer, which is storing 2 million barrels of oil in New Haven, Conn., and in New Jersey.

Most government and industry officials believe that the government is unlikely to buy more oil. Such an action could discourage oil companies from storing more fuel.

Officials at yesterday's meeting also discussed increasing the amount of federal fuel assistance for low-income families and dredging the Providence River so that larger oil tankers can make deliveries. The possibility of having foreign-owned tankers also making deliveries in Rhode Island was discussed.

Yesterday's meeting was closed to the public and the media. Greg McCarthy, Reed's press secretary, said the organizers wanted to minimize posturing and to ensure participants were as candid as possible.

Chafee yesterday defended that decision. "Sometimes it is important to do your homework before you have an open meeting," he said.

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-- Martin Thompson (mthom1927@aol.com), September 19, 2000