[Congressional Record Volume 146, Number 11 (Wednesday, February 9, 2000)]
[Senate]
[Pages S545-S547]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD (for himself, Mr. Lieberman, Ms. Snowe, Mr. Jeffords, 
        Mr. Lautenberg, Mr. Reed, and Mr. Leahy):
  S. 2047. A bill to direct the Secretary of Energy to create a Heating 
Oil Reserve to be available for use when fuel oil prices in the United 
States rise sharply because of anticompetitive activity, during a fuel 
oil shortage, or during periods of extreme winter weather; to the 
Committee on Energy and Natural Resources.


                the home heating oil price stability act

  Mr. DODD. Mr. President, I am pleased to be joined by Senators 
Lieberman, Snowe, Jeffords, Lautenberg, Reed and Leahy in introducing 
the Home Heating Oil Price Stability Act.
  For the past several weeks, Connecticut and the Northeast have been 
gripped by cold weather and skyrocketing heating oil prices. 
Approximately 36 percent of households in the Northeast rely on home 
heating oil. On Friday, February 4th, home heating oil cost $2 per 
gallon in Hartford, Connecticut and $1.80 per gallon a little farther 
east in Groton, Connecticut, almost double the price from mid-January. 
Prices averaged $.86 per gallon during the winter of 1998/1999.
  Independent, family-owned heating oil retailers in Connecticut are 
struggling to meet their delivery demands because of supply 
constraints. Local oil terminals are at dangerously low levels. Last 
week, supply levels of heating oil were so low in Bridgeport and New 
Haven that the Connecticut Department of Environmental Protection 
issued a 48-hour waiver to allow the sale of 7-9 million gallons of 
heating oil with sulphur content above the level permitted by state 
law.
  To be sure, the extreme cold weather and isolated refinery problems 
have contributed to the supply strain. Icy waters around New Haven had 
slowed the off-loading of some heating oil in late January and early 
February. However, even after tankers were able to unload millions of 
gallons last weekend, customers throughout Connecticut are still paying 
record-high prices as high as $2.10 per gallon--supply is still tight.

[[Page S546]]

  The Northeast is always cold in winter, so why are consumers and 
retailers suffering so much this winter? Many analysts believe that the 
precarious petroleum situation was precipitated by a calculated 
decision by OPEC and others to cut back production, and by major oil 
companies adhering to a practice of just-in-time inventories. As 
petroleum prices began to rise in reaction to OPEC action, refiners 
drew down from their already low stock of lower-priced crude rather 
than purchasing higher-priced crude and thus replenishing the stocks. 
Inventories dwindled and the supply is now at record low levels. For 
the week ending January 14, the total distillate stock for the East 
Coast was 33.5 million barrels compared with 69.1 million barrels a 
year ago.
  What do these events mean to the average consumer in Connecticut and 
the Northeast? Dramatically higher costs, for starters. Heating oil 
bills are averaging 30-60 percent higher than last year. The wide range 
is due to the extent to which people are turning down their thermostats 
to ration supply and stretch their dollars. Schools, libraries and 
small businesses are seeing their budgets burst as more money is 
allocated for fuel. The Middletown, Connecticut school system has spent 
more than twice as much for heating oil from October to January than 
during the same period a year ago, despite a warmer than average 
December.
  Some market analysts believe this is a temporary situation. Mr. 
President, this is not a temporary situation. Just-in-time inventory 
practices appear to be here to stay. OPEC has intimated that the 
petroleum production drawbacks may continue beyond March, thus causing 
further instability at a time when peak demand for gasoline begins. 
This is a perennial problem--unusually high heating oil prices in 
winter followed by skyrocketing gasoline prices in the summer.
  Today's legislation is an effort to address the heating oil problem 
for the long-term. It would create a heating oil reserve of 2 million 
barrels in leased storage facilities in New York Harbor and 4.7 million 
barrels of heating oil in one of four Strategic Petroleum Reserve (SPR) 
caverns along the Gulf Coast. The Secretary of Energy may fill the 
reserve by trading crude oil from the SPR for heating oil. The 
President may draw down the reserve when fuel oil prices in the United 
States rise sharply because of anti-competitive activity, during a fuel 
oil shortage, or during periods of extreme winter weather.
  Let me be perfectly clear. The creation of a Government regional 
heating oil reserve is not intended to compete with the commercial 
sector for sales under normal conditions. It is intended, rather, to 
help stabilize supplies and prices during critical periods.
  I, along with Senator Lieberman, first raised the issue of 
establishing a regional reserve in 1996 when Connecticut consumers were 
facing unusually high heating oil prices attributed to extreme winter 
weather and domestic and international events, including the onset of 
just-in-time inventories. We asked the Department of Energy (DOE) to 
examine regional reserve feasibility and report back to Congress. Their 
conclusions form the foundation of our legislation.
  Mr. President, I have an article from July 13, 1998 coinciding with 
the release of the report that states a positive benefit/cost ratio if 
a small reserve were located in leased terminals in the Northeast and 
filled by trading crude from the SPR for the distillate. As I stated 
briefly a moment ago, our legislation also establishes a backup 4.7 
million barrel reserve in the Gulf due to excess capacity there.
  This legislation should be part of a long-term solution. In the 
meantime, Connecticut and Northeast residents need near-term action. 
Advice to just ride out the winter is simply not acceptable. Hardest 
hit are the poor and elderly who should not have to choose among having 
a warm house, food on the table, or medicine in the cabinet.
  The current home heating oil crisis cuts across all income levels. 
The 1999/2000 winter will go down in the history books as the year with 
the highest heating oil prices ever. I am sure you will agree with me 
that this is one record that need never be broken. I urge our 
colleagues to join me, Senators Lieberman, and our other cosponsors in 
support of working families, small businesses, and towns across the 
Northeast to move forward with this legislation. I ask unanimous 
consent that a copy of the bill and additional material be entered in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2047

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Home Heating Oil Price 
     Stability Act''.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) a sharp, sustained increase in the price of fuel oil 
     would negatively affect the overall economic well-being of 
     the United States, and such increases have occurred in the 
     winters of 1983-84, 1988-89, 1996-97, and 1999-2000;
       (2) the United States currently imports roughly 55 percent 
     of its oil;
       (3) heating oil price increases disproportionately harm the 
     poor and the elderly;
       (4) the global oil market is often greatly influenced by 
     nonmarket-based supply manipulations, including price fixing 
     and production quotas; and
       (5) according to the June 1998 Department of Energy 
     ``Report to Congress on the Feasibility of Establishing a 
     Heating Oil Component to the Strategic Petroleum Reserve''--
       (A) the use of a Government-owned distillate reserve in the 
     Northeast would provide benefits to consumers in the 
     Northeast and to the Nation;
       (B) the Government would make a profit of $46,000,000 from 
     drawing down and selling the distillate;
       (C) consumer savings, including reductions in jet fuel, 
     would total $425,000,000;
       (D) there are a number of commercial petroleum storage 
     facilities with available capacity for leasing in the New 
     York/New Jersey area; and
       (E) it would be cost-effective to keep a Government 
     stockpile of approximately 2,000,000 barrels in leased 
     storage in the Northeast, filled by trading some crude oil 
     from the Government's strategic reserve of oil for the 
     refined product.

     SEC. 3. AUTHORIZATION OF HEATING OIL RESERVE.

       (a) Creation of Reserve.--The Secretary of Energy shall 
     immediately create a heating oil reserve consisting of--
       (1) 2,000,000 barrels of heating oil in leased storage 
     facilities in the New York Harbor area; and
       (2) 4,700,000 barrels of heating oil in 1 of the 4 
     Strategic Petroleum Reserve caverns on the coast of the Gulf 
     of Mexico.
       (b) Exchange for Crude Oil.--The Secretary of Energy may 
     acquire heating oil for the reserve by trading crude oil from 
     the Strategic Petroleum Reserve for heating oil.

     SEC. 4. DRAWDOWN OF HEATING OIL RESERVE.

       The President may immediately draw down the Heating Oil 
     Reserve--
       (1) when fuel oil prices in the United States rise sharply 
     because of anticompetitive activity;
       (2) during a fuel oil shortage; or
       (3) during a period of extreme winter weather.

     SEC. 5. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to the Secretary of 
     Energy to carry out this Act $125,000,000 for the period of 
     fiscal years 2000 through 2019.
                                  ____


            [From DOE Fossil Energy Techline, July 13, 1998]

DOE Sends Report to Congress Analyzing Costs, Benefits of Regional Oil 
                            Product Reserve

       A Department of Energy (DOE) report, commissioned two years 
     ago when high prices and low stocks of heating oil raised 
     consumer concerns, has concluded that a Government-controlled 
     ``regional petroleum product reserve'' would make economic 
     sense only under a very narrow set of conditions.
       The report, which DOE forwarded to Congress late last week, 
     concludes that the benefits of a Government stockpile of 
     heating oil in the Northeast would exceed its costs only if 
     the reserve was relatively small, approximately 2 million 
     barrels, located in leased terminals, and filled by trading 
     crude oil from the government's Strategic Petroleum Reserve 
     for the distillate product.
       Storing distillate product in dedicated salt caverns at the 
     Strategic Petroleum Reserve along the Gulf of Mexico 
     coastline would improve the cost-benefit characteristics, the 
     study found, but products would take 7-10 days to reach 
     consumers in the Northeast.
       A larger product reserve, sized at around 6.7 million 
     barrels to meet the worst weather contingencies, would not be 
     attractive based on the cost-benefit analysis unless it was 
     constructed entirely within the existing Strategic Petroleum 
     Reserve sites.
       Moreover, the study found, the positive economic benefits 
     would be achieved only if the Government adopted the policy 
     of releasing the entire volume of the product reserve at the 
     point heating oil prices reached a predefined ``trigger 
     price.'' A more conservative policy of releasing only enough 
     crude oil to bring wholesale prices back down to a predefined 
     ``ceiling price'' would not provide sufficient benefits to 
     offset the reserve's costs.

[[Page S547]]

       The two-volume study is titled ``Report to Congress on the 
     Feasibility of Establishing a Heating Oil Component to the 
     Strategic Petroleum Reserve.'' The Energy Department 
     undertook the study when in 1995-1996 an unusually long 
     winter, uncertainties about production from Iraq and the 
     Organization of Petroleum Exporting Countries (OPEC), and 
     increased global demand for petroleum led to a gasoline price 
     surge and later, a price increase in middle distillate fuels 
     used for heating oil, diesel and jet fuel. Consumers in New 
     England, which has no refineries, became especially concerned 
     about heating oil inventory levels and the rise in heating 
     oil prices.
       The events of 1996 prompted several members of Congress 
     from New England states to urge DOE to carry out a study to 
     determine whether or not Government intervention in petroleum 
     markets in the form of a regionally-cited refined product 
     stockpile could be beneficial.
       The Federal Government currently stores only crude oil for 
     emergency purposes, principally to protect the United States 
     from disruptions in petroleum supply, especially imported 
     crude oil. The Strategic Petroleum Reserve currently stores 
     563 million barrels of crude oil along the Gulf Coast in four 
     sites that are accessible to most refining centers in the 
     country.
                                  ____


                 [From the Boston Globe, Feb. 6, 2000]

                          Buffering Oil Prices

       The surge in home heating and diesel oil prices has shocked 
     householders, truckers, and others and sparked a fresh round 
     of suspicions that massive collusion is responsible. Would 
     that such cooperation existed. Instead, business anarchy has 
     much to do with the rise. The attorney general's consumer 
     protection division should seek to assure that there is no 
     price gouging by individual dealers. In the meantime, 
     prevention of future price spikes is available to government 
     in a form that need not be intrusive. Oil prices spurted 
     because inventories were inadequate. Public reserves are 
     needed.
       The impact has been severe. Oil deliveries costing $400 
     have been a shock for elderly homeowners living on fixed 
     incomes. Even low-cost, emergency suppliers like Joseph 
     Kennedy's Citizens Energy Corp. have been stymied by 
     shortages and high prices.
       The American Petroleum Institute keeps track of inventories 
     of gasoline, oil, crude, and other petroleum products around 
     the country. Among all these, heating oil is unique because 
     demand for it is seasonal, peaking in the winter months.
       While some extra stockpiling of oil by the private sector 
     takes place every year, the tendency has been to cut reserves 
     as close to the bone as possible. This past fall, despite 
     indications that consumption was on the rise, inventories ran 
     significantly below their year-earlier levels. At the end of 
     December, inventories of distillate fuel oil (both diesel and 
     heating) stood at 124 million barrels compared with 156 
     million barrels a year earlier. Both these figures run well 
     below comparable statistics in the past, when inventories 
     were frequently above 200 million barrels.
       The federal government in the 1970s set up a strategic 
     petroleum reserve of crude oil to dampen the power of OPEC, 
     the international oil cartel. But it needs a similar reserve 
     of distillate to help cope with domestic developments like 
     this year's failure to stockpile adequate oil to cope with 
     predictable seasonal surges, much less unpredictable cold 
     snaps. The mere presence of such a reserve, available for 
     rapid release, would dampen spot markets. To do less condemns 
     everyone to senseless repeats of this painful experience.

  Mr. LEAHY. Mr. President, I rise in support of the Home Heating Oil 
Price Stability Act being introduced today by Senator Dodd. In response 
to Congressional concern raised over volatile heating oil prices, the 
Department of Energy completed a study of regional oil reserves and 
issued their report in 1998. This report concluded that regional 
heating oil reserves, such as the one proposed in this bill, would 
benefit New England and help guard against the negative effects of 
volatile fuel prices during the winter months.
  The recent price spike in home heating fuel throughout the Northeast 
and mid-Atlantic regions illustrate the need for a regional fuel 
reserve. Prices of home heating fuel have increased over the last month 
to unprecedented levels, putting many families and businesses at risk 
during these cold winter months. Many areas of New England are now 
facing fuel costs between $1.70 and $2.00 per gallon--nearly double 
last January's average price of .80 cents per gallon. Home heating fuel 
has not seen average prices over $1 dollar in nearly ten years. These 
prices are endangering the welfare of low income Vermonters and 
threatening the stability of our economy.
  This is not the first time we have seen such volatile prices in New 
England and will certainly not be the last. I remember Vermont in 
December 1989, when we experienced the coldest temperatures the 
Northeast has seen in 100 years, and then again in 1993 when the 
mercury plummeted and the fuel bills rose. Mr. President we need a 
regional home heating fuel reserve to protect the welfare and the 
economy of states such as Vermont. The cold winters and the absence of 
refiners make New England susceptible to fluctuations in the market 
which leave other parts of the country virtually untouched.
                                 ______