SAUDI ARABIA'S decision to increase its crude oil production by 500,000 barrels may drive down the price on world markets, but consumers who burn heating oil in their furnaces can expect short supplies and steep price hikes this fall.
Oil experts have known for several months that a heating-oil crisis is looming, but the U.S. Senate seems to be dithering.
Inventories of heating oil are low. On the East Coast, which consumes about 75 percent of the nation's heating oil, 15.3 million barrels are stockpiled. A year ago at this time, 41.3 million barrels were in storage.
A series of unfortunate decisions by refiners is at the heart of the problem. Thinking that the Federal Reserve's higher interest rates would slow the economy and gasoline consumption, refiners did not build up their gasoline inventories during the winter.
As we know, the economy did not slow down and gasoline consumption continued at a torrid pace. In late spring, most refiners normally switch their production mix to increase the amount of heating oil and reduce gasoline output. This year, refiners had to continue producing gasoline just to meet demand.
The combination of low inventories and a late state in home heating oil means shortages are a real possibility, while higher prices are inevitable. Estimates vary, but consumers can expect to pay between $1.10 to $1.40 a gallon for heating oil, as long as there are no supply interruptions. A severe winter could be disastrous, particularly for lower-income households.
President Clinton has announced he is prepared to use his administrative authority to create a heating oil reserve for the Northeast. The House has approved such a reserve. Even though time is short, the Senate has not acted.
Congress should not delay any longer; stockpiling must begin immediately. Inaction guarantees many Americans may be facing the coldest winter in years.