WASHINGTON - The Clinton administration took several additional steps yesterday to cushion the oil market against shortages this winter and to soften the shock of higher prices for consumers. Like the temporary release of oil from the Strategic Petroleum Reserve, announced Friday, the new measures are intended mainly to ease tight supplies of heating oil, President Clinton said.
Environmental regulators are to explore ways to permit more varieties of heating oil to be burned, the government will try to smooth out the effects of its own fuel purchases, and the administration will ask state utility regulators to keep a sharp eye on fuel inventories at power plants and factories, he said.
At the same time, Clinton directed the Department of Health and Human Services to release $400 million in aid for poor families to help them buy fuel. (Maryland's share will be $6.4 million.)
"The overriding purpose for our action is to increase supply and help consumers make it through the cold winter," Clinton said. He defended as "plainly a prudent thing to do" his decision to release crude oil from the reserve, which had been recommended by Vice President Al Gore but was denounced by Gov. George W. Bush as a political ploy.
Despite the avowed focus on home heating oil, the broader effects of the intervention in energy markets will be felt by consumers whenever they fill up at a gas station, pay for an airline ticket or even pay the family's bills for electricity or natural gas, according to energy experts.
Of the 30 million barrels that the government will lend to refineries in the next several weeks from the Strategic Petroleum Reserve, 85 percent to 90 percent will be turned into products other than home heating oil, Energy Department officials said. Fixing a shortage of heating oil is like confronting a shortage of brisket, they said; you have to kill the whole steer, which will also produce hamburger and sirloin, along with leather.
Refineries will vary the proportions slightly, depending on market prices for products, but in general half of each barrel of crude oil becomes gasoline, a quarter becomes heating oil or diesel fuel (which are nearly identical) and a tenth becomes jet fuel. The rest goes to everything from lubricating oils to asphalt to floor wax.
Because of futures markets, which send price signals faster than oil can flow physically through pipelines, consumers can expect to see prices declining across the spectrum fairly soon. But because the oil that will be released must be paid back later by oil companies, prices may rebound later, experts say.
The immediate effect is that "the speculators will run," said Gary N. Ross, the chief executive of the Energy Group, a consulting firm in New York. People who hold contracts today that specify that oil will be delivered to them this winter will sell some of those contracts because more oil will be available in the winter, and as they sell, prices will fall, he and others said.
Even before the announcement on Friday, which came after futures markets closed, heating oil for delivery in October fell by 4.41 cents a gallon, to 95.48 cents.
But only about 10 percent of households use heating oil or kerosene as their primary fuel, according to the Energy Department's most recent survey, in 1997.
Philip K. Verleger Jr. of the Brattle Group, a consulting firm in Cambridge, Mass., said the sudden gush of oil onto the market would probably push the price of crude down by $5 to $7 a barrel, which comes to 10 to 15 cents a gallon.