Home heating oil prices expected to rise Low supply is seen as main culprit

September 26, 1996|By Liz Bowie | Liz Bowie,SUN STAFF

Stoking the furnace is likely to be more expensive this year because stocks of home heating oil in the United States are at their lowest in two decades.

While no one is predicting homeowners will be cold this winter, consumers could be turning down the thermostat as the price rises. How high the price will rise could be determined by factors as varying as Boris N. Yeltsin's heart, the weather and European markets.

But yesterday speculators drove wholesale heating oil prices to 71.77 cents per gallon, a post gulf war high.

The normally cautious Department of Energy's Energy Information Administration said last week that distillate stock levels in the nation are 16 percent below the five-year average, and predicted the nation would have to import supplies and beef up production to meet the normal demand. Distillate is one of the products refined from crude oil and is used for heating oil.

One way of putting that shortfall in perspective, said Smith Barney energy analyst John Saucer in Texas, is to realize that we are starting the fall with the same amount of oil that is usually available at winter's end when much of the supply has been used up.

And the picture is most bleak on the East Coast, where the supplies are lowest. In the mid-Atlantic and New England combined, there are 26.5 million barrels of distillate now in storage, 46 percent below the normal level, Saucer said. He predicts the price could be more volatile, particularly if Yeltsin's heart problems worsen or if tension in the Middle East increases.

Not all analysts are predicting the supply will remain low and prices high. NatWest Securities Vice President Holly Gustafson in Baltimore said she believes prices will come down after a November OPEC meeting. In addition, she said, production will be stepped up to meet demand.

Stockpiles are low because oil companies have adopted a cost-cutting policy of maintaining lower inventories. "You don't want to carry oil that is going down in prices," she said.

And the American Petroleum Institute, a trade group, downplayed the problem, saying that companies could adequately supply the United States, if not with current stocks, through imports.

In usual years, Americans can depend on importing inventory from Europe when stocks become too low, but this year the current price in Europe is even higher than in America. As a result, the United States might have to rely more on imports from Asia and South America, where prices are high and shipping costs to U.S. ports even higher.

Predictions of how high the price might rise will come Monday, when the Department of Energy makes more detailed estimates. But heating oil dealers are encouraging customers to fill their tanks now to avoid what could be a 10 to 20 cent increase in the price in November. In June, the wholesale price of oil was 50 cents.

"At this time of year, it is very dangerous when prices are this high," said Linda Mae Cooper, president of Blue Ridge Fuel Corp. in Baltimore. At present, natural gas prices are low compared to oil, analysts said, but they predicted increases as some customers switch from oil to gas.

Pub Date: 9/26/96

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