Region's oil stockpiles low even before winter begins

Senate approves heating oil reserve for Northeast

By JUSTIN POPE

Associated Press Writer

BOSTON (AP)  Advocates for the elderly have a grim prediction if nothing is done to bring down home heating oil prices in New England this winter.

"People are in jeopardy here," said Geoff Wilkinson, executive director Massachusetts Senior Action, nonprofit senior advocacy group. "People could freeze to death."

The killing may be by stealth, Wilkinson says. Elderly people may turn down their heat and catch a cold, which could turn into fatal pneumonia.

"The Social Security cost-of-living increases that people get are nowhere near enough to address this," he said. "Its going to force real, cruel choices on people."

Energy officials have estimated heating oil costs will jump to $1.31 per gallon this winter, up from $1.19 last winter and 80 cents the winter before that. The shortage is particularly acute in New England. However, its a problem nationwide, with reserves down to 46 million barrels  from 71 million barrels a year ago.

The elderly poor are the most vulnerable. Massachusetts has 260,000 seniors with incomes below 200 percent of the poverty line, which amounts $22,500 for a couple. An additional 100,000 live at or below the poverty line, which is set at $11,250 per year for a couple, or just $8,352 for an individual.

Federal grants, administered in Massachusetts by 22 nonprofit groups, do help seniors pay for heating fuel. Last year, the South Middlesex Opportunity Council in Framingham helped 3,600 households with grants of between $100 and $830.

This year, people with incomes of up to 200 percent of the poverty line will be eligible for the federal money. Last year, the cut-off was 175 percent.

But Bill Minkle, the SMOCs director of energy and financial assistance, says the increase will do little good because housing also has skyrocketed.

"That, coupled with the energy crisis, theyre worse off, even though theyre working," Minkle said.

One indication of the problem is that wholesalers simply arent stockpiling for the months ahead.

Last year at this time, New England wholesalers had 14 million barrels on hand, a number that was "drawn down" to 3 million by January of a cold winter. Typically, they have 8 to 10 million barrels. This year, they have just 3.1 million barrels in reserve heading into the coldest months.

Wholesalers can order oil for future delivery at attractive prices, says Massachusetts Oil Heat Council president Michael Ferrante, so there is little incentive for them to pay higher prices now and stock up.

That means a cold spell could come too suddenly for wholesalers to replenish their inventories.

"The big problem with inventories is that it really reduces our ability to endure a severe weather emergency," said David OConnor, the states commissioner of energy resources.

The federal government has set up a Northeast Home Heating Oil Reserve, storing 2 million barrels in Connecticut and New Jersey.

But some consumer advocates say the state government should intervene to encourage companies to increase their stockpiles.

Gov. Paul Cellucci has proposed a $32 million heating oil program to help low-income households, provide incentives for consumers to improve heating efficiency, and help control fuel costs. The plan includes $5 million to encourage oil wholesalers to increase their oil on hand.

Larry Chretien, executive director of the consumer group Mass Energy, wants more done. He says the state should buy a million barrels of oil for January delivery and sell it at cost then. That would ensure theres plenty of oil in January, the heart of winter, and transfer the risk of a drop in oil prices from wholesalers to the state.

Another activist, Joe Kennedy of the Citizens Energy Corporation, has proposed requiring wholesalers to keep their stockpiles above a certain level, much as banks are required to keep cash on hand. That could increase prices, but would act as a kind of insurance.

But since refineries are already near full capacity, its not clear that any increase in supply, such as the recent release of 30 million gallons from the Strategic Petroleum Reserve, will result in more or cheaper heating oil.

And it wont help much for homeowners to top off their own tanks  OConnor says consumers have about enough room for two weeks of fuel at peak demand.

"Under some very extreme circumstances, we might find ourselves in a position where we dont have enough," he said. "That has never happened, but talking to people in the industry, people will say theyve never seen a set of circumstances like this in their careers."

-- Martin Thompson (mthom1927@aol.com), October 20, 2000