Washington, D.C., Area Home Heating Oil Supplies Adequate But at Escalating Prices
EMD-80-42: Published: Jan 22, 1980. Publicly Released: Jan 22, 1980.
- Full Report:
Since U.S. crude oil supplies fell early in 1979, observers have been concerned about whether sufficient home heating oil would be available for the 1979-80 winter and whether needy people would be able to afford the price. A request was made for an evaluation of heating oil availability and its escalating prices in the Washington, D.C. metropolitan area.
Home heating oil supplies for the Washington area should be sufficient to meet the needs of consumers during the winter. While the Iranian oil cutoff in early 1979 diminished many refiners' stocks, the stocks were rebuilt during the summer and in October 1979 they were 5 percent over the October 1978 level. Nationally, since price decontrol in 1976, residential heating oil prices rose 111 percent as of August 1979, with 58 percent of the increase occurring since January 1979. Prices in the Washington area are about 4 cents a gallon higher than the national average price, principally because one wholesaler which supplies 20 percent of the area's oil bought his oil on the spot market at exceedingly high prices. Although Congress appropriated $1.6 billion to help low income people meet energy costs this winter, a Department of Energy (DOE) study concluded that $3.2 billion would be needed. The study has not determined whether a direct-subsidy is the best long-term approach to the problem. The DOE response to escalating heating oil prices has been inadequate and particularly distressing in view of the severe economic hardships high energy bills pose. DOE has not implemented a recommendation by its Office of Hearings and Appeals to conduct a series of studies to determine the extent to which workable competition exists in the refinery sector of the heating oil industry.
Recommendation for Executive Action
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Secretary of Energy should determine whether the current heating oil prices are equitable and justified by increased costs and, if not, whether Federal action is needed. Such price determinations should be made periodically and their frequency should be based on factors such as changes in market conditions and significant shifts in supply and demand. The Secretary should also prepare the study assessing the competitiveness of the refinery sector of the heating oil industry as recommended earlier by the DOE Office of Hearing and Appeals. In addition, the Secretary should evaluate the long-term implications of direct subsidies to assist needy people in paying their energy bills in order to determine whether this is the best means of offsetting the effects of increased home energy costs.