Jul 31, 2000 - 11:25 PM

Energy Secretary, Industry Work on Plan to Keep Home Heating Oil Prices Down By Mark Pratt Associated Press Writer

WALTHAM, Mass. (AP) - With New England's supply of heating oil lower than it was a year ago, U.S. Energy Secretary Bill Richardson says he is working with the industry to avoid a repeat of last winter's soaring prices. Nationwide, oil inventories are 19 percent below where they were last year. But along the East Coast, inventories are 45 percent lower - at about 35 million barrels, Richardson said Monday after meeting with oil distributors from across New England.

"That is not good," he said. "We've got a potential problem with low inventories."

At the same time, the price of natural gas, which heats about half of the nation's homes and is the primary heating fuel in the Midwest, has doubled during the last year, causing many economists to predict higher heating costs this winter across much of the country just as voters head for the polls.

While the peak heating season does not start until after November, many suppliers begin stockpiling fuel in the fall, when wholesale prices may already begin to go up if there are signs of impending shortages, according to energy experts.

Richardson said the Clinton administration will work with dealers to increase the low heating oil inventory, improve delivery and distribution systems, and establish a home heating oil reserve for New England to prevent out of control prices this winter. He did not offer an explanation for the lower inventories.

Home heating oil climbed to more than $2 per gallon last winter, after being at about 85 cents the previous winter.

Memories of last year's sharp spikes in heating oil prices have lasted in the minds of consumers and some are already planning ahead.

Oil retailers say they've seen a surge in customers who are taking advantage of price-cap contracts, which are plans that allow them to lock in a guaranteed price for the commodity and spread payments over a year. While the plans have been offered for years, they most often were used by companies, not private consumers.

President Clinton has already established a 2 million barrel reserve - about two or three days' supply - and is waiting for Congress to agree on a "trigger" mechanism that would prompt its release.

The industry is worried that the release of the reserve could drive down prices, but Richardson said the reserve would only be used as an emergency supply.

It could also be used if the price difference between home heating oil increases by 60 percent over the price of crude oil.

During a closed-door meeting with Richardson, industry leaders proposed tax incentives for distributors who store more oil on site to increase inventories. Richardson said he would be interested in looking closely at the proposal.

"This year we are trying to plan ahead," said Jack Sullivan, executive vice president of the New England Fuel Institute, which represents about 1,100 home heating oil distributors in New England.

Richardson's efforts resonated with about 250 people in attendance.

"We have a common objective," said Dick Horan, president of Hughes Oil in Boston. "We have to have an adequate supply at a reasonable cost."

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-- Martin Thompson (mthom1927@aol.com), August 01, 2000