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Energy Crisis Feared

Even OPEC Action May Not Relieve Home Heating Woes

Sept. 8  The cost of heating a home this winter could be 20 percent to 40 percent higher than last year, with both oil and gas prices up and supplies down, according to a government energy report.

The price of residential natural gas, adjusted for inflation, is projected to go to its highest level since the early 1980s, said Neil Gamson, an economist with the U.S. Energy Information Administration.

At the same time, he added, average home heating oil prices are expected to be among the highest since the Gulf War, and supply shortages could contribute to price spikes such as last winters surge in New England.

We really have the makings of an energy crisis here, for this winter, said John Kilduff, senior vice president of risk management for Fimat USA Inc. in New York, citing bad news for natural gas, oil and heating oil.

Some of the bad news came this week in the Energy Information Administrations short-term energy outlook for September.

According to the report, assuming normal winter temperatures, the combination of higher expected consumption and higher prices would be expected to yield average increases in heating fuel expenditures of 20 [percent for heating oil] to 40 percent [for natural gas] this heating season.

President Sees World Problem

With the price of crude oil  from which heating oil is made  spiking to a 10-year high of around $35 per barrel, oil troubles could become much more far-reaching than a U.S. heating oil shortage.

President Clinton complained Thursday that oil is too expensive not just for America but for the world, and raised concern about a recession striking somewhere around the globe.

Clinton said he told Saudi Arabias Crown Prince Abdullah this week at the U.N. Millennium Summit that he hoped the oil-producing nations of OPEC, meeting Sunday in Vienna, would agree to increase production to force down prices.

Can OPEC Help?

But an oil industry analyst said even immediate action by OPEC cannot bolster sagging American heating oil supplies in time for winter, and might not be able to control prices.

That oil takes 40 to 50 days to arrive in the United States, said George Berenek of the Petroleum Finance Company, an oil-industry consulting firm. He added that a scarcity of tankers and the time it takes to process the oil may delay matters further.

Were going to see high crude oil prices through the winter, Beranek said. The die is pretty well cast.

Jonathan Cogan, an energy information specialist for the U.S. Energy Information Administration, agreed OPEC action might not yield more winter heating oil in time to replenish American inventories that were about 37 percent below last years levels as of Sept. 1. But he said the promise of oil on the way might help to lower prices.

The price that the market sets isnt only set by actual physical reality; its also set by perception, Cogan said. The actual supplies of crude oil wouldnt reach here immediately, but the downward pressure on crude oil markets would push prices down.

Natural Gas Squeeze

Even worse may be the situation with natural gas, which is in short supply because North American producers slowed production when three straight warm winters reduced demand and prices.

Were seeing very high prices, and those prices are only going to go up if we see a colder than average winter, Beranek said.

On the other hand, Gamson said, If, for some reason, the weather turns out to be very mild in November and the gas marketers can keep putting gas into storage  we will see prices start to drop.

Although a National Weather Service forecast calls on average for a slightly-warmer-than-normal winter, it predicts temperature swings and a considerably colder winter than the past three (see related story).

Believe me, there are a lot of companies spending a lot more money looking for and producing gas, Beranek said. But it takes time.  Youre going in a very short period from really slowing down production to trying to crank it into high gear. You can only drill a well so fast.

The natural gas shortage is not connected to crude oil supplies or OPEC, and must be addressed mainly domestically, Beranek said.

Previous OPEC Action Ineffective

That may not be the case with heating oil, which is made from crude oil.

The Clinton administration had hoped that OPEC production increases in March and again in June would force crude oil prices down to the $20 to $25 a barrel range. While there were brief declines, those price reductions never materialized as continuing strong worldwide demand kept prices from $30 to $35 a barrel through the present.

In July, Saudi Arabia said it would boost production unilaterally by another 500,000 barrels a day to try to get prices down to the $25 a barrel range, but so far those increases have not been apparent on world markets, according to an Energy Department analysis.

Clinton said he was particularly concerned because the Northeast is so dependent on heating oil. And were attempting now to fill our reserve and to look at what all of our options are, particularly for meeting the home heating oil needs of the American people, the president said. He called anew on Congress to pass a long-term energy agenda.

ABCNEWS.coms Michael James and The Associated Press contributed to this report.

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Oil Issue Hits the Campaign

After a summer of high gasoline prices and the prospect of hefty home heating bills this winter, the rising prices have revived a fight over energy policy in the presidential campaign.

Republicans accused Democratic candidate Al Gore of being part of an administration that let U.S. influence over OPEC slip.

Gore, meanwhile, has accused Republican presidential candidate George W. Bush, a onetime oil man, and his running mate Dick Cheney, who ran an oil-services businesses for the last five years, of being in the pocket of the oil industry.

With the potential to shake Americas booming economy, the surge in oil prices is particularly troubling because U.S. inventories are at a 24-year low.

The Associated Press

-- (news@of.note), September 10, 2000

Answers

"U.S. inventories are at a 24-year low."

Interesting. One wonders why. Problems in the pumping perhaps?

-- Wonderin (-@about.lots.of.things), September 10, 2000.

This is why we need Al Gore to counter the last 8 years of Bush/Cheney.

-- Time For A Change (kick@out.bush), September 10, 2000.