Oil supplies fall as nation shivers

It could be the nation's latest equivalent of the Perfect Storm. A frigid winter forces a large part of the US to turn up the thermostat. A major supplier produces only a trickle of crude. Oil inventories plummet to their lowest level in 35 years.

This is the scenario that has energy analysts fretting over the nation's immediate energy future - just as the president is trying to decide whether to invade Iraq. Senators are calling for President Bush to open up the Strategic Petroleum Reserve - just as President Clinton did two years ago.

Across the country, social agencies are clamoring for some kind of emergency funding from Congress to help the poor pay their heating bills. So far, homeowners in the Northeast who use fuel oil are paying 25 percent more than last year. Natural gas prices at the wellhead are up 46 percent.

And all this was before the latest Arctic air mass hit. Now, the thermometer is not expected to get above zero degrees in eastern Montana, and Little Rock, Ark., will dip into the single digits. Even Rock Hill, S.C., on Lake Wylie, will see snow.

It seems as if Mother Nature has plans to turn the US into a natural hockey rink. That may be good for stoic sauna-taking Minnesotans, but it's not good for energy prices.

"Signs are pointing to things tightening up," says Dave Costello, an energy analyst at the Energy Information Agency. "I'm not sure how much worse it will be in a week or two."

New information comes out today, and energy analysts expect it will show a continued draw-down of oil supplies because of the cold weather.

Some of that, however, is the result of large users of natural gas being shifted over to heating oil. Last week, for example, Yale University shifted from natural gas to oil. And yesterday, Colgate University, which normally uses wood for its furnaces, also burned 3,500 gallons of fuel oil. "Costs are going sky high," says Vige Barrie, a spokeswoman at the Hamilton, N.Y., university.

Despite the cold weather and low inventories, there are no outright shortages cropping up. Yes, heating-oil inventories are lower than last season, but John Huber, president of the National Oilheat Research Alliance, says that is not a cause for concern, since the oil industry now operates on a "just in time" type of delivery system. "I focus on the transportation system, and deliveries will get disrupted if the rivers freeze over or there are bad Atlantic storms," he says.

So far, the US Coast Guard is operating ice breakers on the Great Lakes, the Penobscot River in Maine, and on the Hudson. According to a Coast Guard spokesman, there are now some delays on the Hudson due to ice as thick as 12 inches between Newburgh and Troy, N.Y. "The Coast Guard is monitoring the situation, and we will continue preventative ice-breaking and assisting vessels as necessary so commerce can continue," says Jolie Shifflet, a spokeswoman in Washington.

Sen. Charles Schumer (D) of New York thinks there is a need for a different type of intervention. He wants President Bush to consider opening up the nation's Strategic Petroleum Reserve.

"The bottom line is that prices are at some of their highest levels, and we have to show OPEC that we mean business and that they can't constrict supplies," says Senator Schumer. "We're not saying we have to sell the oil now, but the threat of doing it will have a positive impact on prices."

With prices higher this winter, social agencies report that they are deluged with calls from senior citizens and poor people who can't pay their heating bills. That's what's happening in York County, Maine, where calls for help are up about 15 percent. "What we need is emergency funding, like we got from the ice storm [in 1996]," says Tom Nelson, executive director of the York County Community Action Program.

On Tuesday night, Congress started the process to get aid to places like York County. The Senate passed an amendment that would add $300 million to the Low Income Heating Assistance Program (LIHEAP). That would bring the total available to $2 billion. "Imagine a hard-working, low-income family that must decide to heat their home or provide food for their children, or an elderly couple living on a fixed income who has decide whether to pay the heating bill or buy medicine," says Sen. Jack Reed (D) of Rhode Island, a cosponsor of the legislation. "These families are why LIHEAP was created 25 years ago."

The new aid. if it gets incorporated in the final US budget. will be welcomed in Little Rock, where the temperature is dipping into the single digits. Many working poor or those on fixed incomes have shown up at the Central Arkansas Development Council looking for help. "We have not seen that number of disconnects for the elderly or disabled before," says Brenda Fiser, regional manager. "If oil and gas prices go up, it will be just devastating for low-income individuals and families."