With soaring heating oil prices becoming a political issue, the United States said on Wednesday that it would tap its strategic reserves to help ease the energy crunch. But analysts say the effort is unlikely to provide meaningful relief.
The plan covers a loan of up to 315,000 barrels of heating oil, or nearly a third of the one-million-barrel supply in the government's Northeast Home Heating Oil Reserve, the Department of Energy said in a statement. The department will hold a bidding process for fuel retailers and terminal holders, and deliveries are scheduled to be completed by Nov. 13. Companies that borrow fuel from the reserve will have to return the same volume before the next heating season.
"This is a temporary measure to solve a temporary supply disruption," said Energy Secretary Chris Wright. Heading into the midterm elections, Americans are facing higher heating oil prices than ever before. The issue is particularly stark in Maine, where Susan Collins, a Republican, is defending her Senate seat against Troy Jackson. Heating oil prices jumped to a national average of $6.14 a gallon the week of Oct. 12, according to the U.S. Energy Information Administration, and have skyrocketed 50 percent since the war in Iran started at the end of February.
After the announcement, the November heating oil contract fell 3 percent to $4.77 a barrel. Senator Collins said approximately half of Maine households rely on fuel oil to heat their homes. Analysts, however, said the release is too small to significantly change supply. "The volume is too small relative to consumption to significantly change supply," said William O'Neil of S&P Global Energy. More than 80 percent of heating oil used in the United States is concentrated in the Northeast, where 4.79 million households used oil as their primary heating fuel in the winter of 2023.
Source: New York Times Business · Summarized by HeadlinesBriefing