Bracing for oil price jump, N.E. rethinks its reliance

By Beth Daley, Globe Staff, 10/9/2000

ew Englanders have been warned before. Ever since the energy crisis of the 1970s, energy specialists said it was risky for them to rely so much on heating oil to stay warm. It's almost all imported, they said, and vulnerable to sudden price increases.

Yet, as residents brace for a second straight winter of high oil prices, New England remains more dependent on heating oil than almost anywhere else in the United States. The six states have less than 5 percent of the nation's population, but consume a whopping 25 percent of the heating oil that is used in the United States.

Consumers rarely ponder such reliance until times like these, when global politics and complex market economics promise to double last year's price for a warm winter night. Already, conservation cries reminiscent of former president Jimmy Carter's sweaters have returned, and energy exploration is a hot topic in the presidential race.

And tucked-away New Englanders, at the absolute end of any fuel supply line, are once again figuring out how to protect themselves from being squeezed the tightest by an energy crisis. If the rusting wood stoves and discarded solar panels from the last energy crunch are any hint, answers are not going to be easy to come by.

''We have problems,'' said Larry Chretien, executive director of Massachusetts Energy Consumers Alliance, a cooperative oil-buying group. The group was formerly called Boston Oil Consumers Alliance, but Chretien changed the name a month ago and started to buy other energy sources.

''We have to decide as a region how are we going to balance this equation of supply and demand,'' he said. ''And if nothing else, this price [jump] is a reminder that we should stick to what we decide this time, not abandon it like after the '70s.''

In the meantime, an early cold snap could wreak havoc on New England's meager oil reserves, less than a third of what they were last year at this time. Big oil wholesalers are holding off filling their tanks until supply increases and prices drop.

On Friday, the Energy Information Administration warned residents they should prepare for a 25 percent price increase this winter - and costs may go even higher if it's a cold one. Customers are taking the warning to heart: Thousands want tanks filled up now, while prices still hover around $1.30 a gallon.

''I'm feeling depressed about this season,'' said John Walsh, of John's Oil in Lynn, whose company delivers home-heating oil to about 9,000 homes. As he filled up his truck at Revere's Global Oil terminal Friday, Walsh said he was going to search the Internet to see where oil prices are going. ''I look at Russia, I look at Venezuela and the Middle Eastern countries. Everything plays into the price, and I want to make some good decisions,'' Walsh said.

Several things contributed to the high price of oil this year. Last year, the Organization of Petroleum Exporting Countries cut back on production shortly before the depressed Asian economy bounced back with demands for more oil. People getting rich in our own booming economy are building large houses that require more energy to heat. And sport utility vehicles are guzzling record rates of the same basic product found in heating tanks: Crude oil.

''Everyone was driving around in their SUVs this summer, and now they are wondering why we don't have heating oil,'' said Elisabeth Drake, associate director at the MIT Energy Laboratory. ''It's all linked. At some point we are going to have to get in a different mode of thinking about energy.''

For now, the state and federal governments are spending millions to ensure against high prices and help poor families with fuel bills. The state announced this past week a $5 million program to bail out wholesalers if they lose money by filling up their reserve tanks now. Meanwhile, fuel-assistance programs are flooded with applications.

''People are very nervous they aren't going to have enough to get through the winter,'' said Fran Stubbs, fuel director for People Acting in Community Endeavors. Her group helps about 8,000 New Bedford-area families each year.

President Clinton has plans to dip into the nation's petroleum reserves and lend 30 million barrels to energy companies to dampen prices. He is reserving 2 million barrels for the Northeast.

Meanwhile, oil has become a big issue in the presidential race, with Governor George W. Bush of Texas wanting oil exploration to take place on a remote piece of Alaska's Arctic National Wildlife Refuge. Vice President Al Gore vehemently opposes any drilling there. He is pushing for conservation and the development of energy sources.

But few are asking why New England continues to rely so heavily on a fuel that is vulnerable to price increases. Massachusetts is the country's third-biggest consumer of heating oil, behind New York, and Pennsylvania. Oil was king when Boston and the Northeast began its early suburban sprawl, but if you travel virtually anywhere else in the country that developed later, gas is the heating fuel of choice.

Gas has trouble getting to New England because the pipeline system forces it to travel so far from Canada or down South. Two gas lines have come into New England in recent years, and most new homes are equipped with gas heat. Still, gas isn't an escape hatch this season; natural gas prices are also soaring.

Oil has to travel even farther. New England is the only region in the country that doesn't refine its own heating fuel. Strict environmental laws have discouraged the building of refineries, which process oil and make it available nearby. The last big pipeline ends in New Jersey, and most of New England's oil is then transported here on ships or barges. When there are weather problems, like last year when storms coincided with a cold snap, reserves get low. Inevitably, prices rise.

But oil prices have stayed fairly low and stable for the last 20 years. When prices dropped after the last big energy crisis, residents abandoned their wood stoves, windmills, and solar panels. And many specialists say the same thing will happen again: New Englanders will forget about their vulnerabilty to high heating costs after prices drop.

Still, the jump in heating oil prices last January hit residents hard.

''People don't budget for that kind of [sudden price] change,'' said Joanne Shore, senior analyst with the federal Energy Information Adminstration. ''But we are still very, very far away from where we were in 1981 when prices peaked.''

New Englanders are reviving 1970s battle cries to conserve more and switch to other sources of energy. Some ideas floated back then worked: New building codes that require insulation and better-fitting windows have helped reduce the amount of heating oil that homes use, sometimes by about 20 percent, specialists say.

But the search for new energy sources largely failed. Nuclear power lost out because of its high cost and concerns about public safety. Wood stoves are said to be cumbersome and messy. The windmills and solar panels that environmentalists so often praise still produce little energy.

Part of the reason is that the switch to other energy sources, even gas, is risky. Customers can spend thousands only to find out next season that oil prices are dipping to seductive lows again.

''Solar may be free energy, but you have to pay for all the panels,'' said Bill Veno, director of the oil and environmental group at Cambridge Energy Research Associates. ''We're not being punished because we didn't do something in New England. This is a phenomenon of supply and demand.''

Many say that the answer lies in continuing to diversify energy sources. The state is funding experiments with fuel cells - which produce electricity from a hydrogen and oxygen reaction - and is focusing on renewable energy sources, such as solar power, said David O'Connor, commissioner of the state Division of Energy Resources.

''There is nothing wrong with having a substantial number of homes using oil,'' said O'Connor. ''There is a virtue in diversity. We want competing alternatives.''

http://www.boston.com/dailyglobe2/283/nation/Bracing_for_oil_price_jump_N_E_rethinks_its_reliance+.shtml

-- Martin Thompson (mthom1927@aol.com), October 09, 2000

Answers

I can close my eyes and read, from memory, almost exactly the same news story appearing in the oil crisis period of the 1970s.

The big thing about change is that it doesn't change much.

-- Uncle Fred (dogboy45@bigfoot.com), October 09, 2000.