President Clinton’s decision yesterday ordering the Departmentof Energy to trade crude oil from the Strategic Petroleum Reservefor two million barrels of heating oil stored in the Northeast asprotection against fuel shortages this winter may not be enough tocalm down Sen. Charles E. Schumer (D-NY).

Schumer, who claims his state will be the “epicenter” of thenatural gas, fuel oil and electricity “shortfalls and pricespikes,” went into energy panic mode yesterday, calling on thepresident to set up a Presidential Energy Commission made up ofrepresentatives from energy producing and consuming states toexplore short-term and long-term responses to the “potential energycrisis.”

He referred to “record low U.S. inventories” of natural gas,crude oil and heating oil coupled with increasing demand forelectricity, warning it could lead to “the most serious domesticenergy crisis since the 1970s.

“Never in our history have we seen U.S. stocks of natural gas,crude oil and heating oil shrink so low at the same time. And inNew York City, our electricity usage has already surpassed ourgenerating capacity,” said Schumer. “A confluence of shortages inall the major energy components are coming together at once to formwhat could be the ‘perfect’ energy crisis. All it would take is anunseasonably hot summer, or a cool winter to push us over theline.”

Schumer said a new commission could “focus on both the supplyand demand side of the energy equation… We need to get ahead ofthe curve.”

Schumer said Energy Information Administration data shows thatinventories of crude oil, natural gas, home heating oil and dieselfuel are all at 24-year lows. He cites EIA data showing that gasinventories have been lower than 1,450 Bcf at the end of May onlytwice in the past besides this year: in 1996 at 1,161 Bcf and in1997 at 1,365. Meanwhile, he noted gas prices on June 30 at$4.43/Mcf were at record levels of more than twice the 24-yearnational average or $1.80 and more than twice prices in January2000 of $2.12/Mcf. Storage injections this summer have been abouthalf the average rate, he said, because of high demand and flatsupplies.

Meanwhile, crude inventories are 11% below the 24-year averageand oil prices on July 7 were 50% more than the 24-year average. InJune, heating oil and diesel fuel inventories of about 103.7million barrels were about 26% below the 24-year historic averageof 140.2 million barrels. Since 1976, distillate stocks have beenthis low only twice: 1989 and 1996. In addition, he noted, heatingoil prices at 84.6 cents on June 30 were twice the average Juneprice and 23 cents greater than the next highest June price of 61.7cents in 1992.

Schumer also highlighted the power situation in his home statewhere demand behind Consolidated Edison’s citygate grew by 700 MWbetween 1989 and 1996 to 10,950 MW and soared by another 700 MWbetween 1996 and 1999 to 11,650 MW.

Schumer blames OPEC first. The origin of the energy shortage, hesaid, began with OPEC’s supply cuts in March of last year. Thosecuts began to dry up crude and distillate inventories, which led torecord heating oil prices last winter and record gasoline pricesthis summer. The strong economy is to blame for the power andnatural gas situations, he said.

“All it will take is a run of bad weather to spring the trap onthe American people.”

The Clinton Administration believes its decision to add aheating oil element to the Strategic Petroleum Reserve will provideadequate insurance “so that consumers won’t be left literally outin the cold this winter,” said DOE Secretary Bill Richardson.”While it might be difficult to focus the nation’s attention onsub-freezing temperatures during the middle of July, it isimportant we set up this reserve now so that there will be adequatesupplies of heating oil come this winter.”

The DOE plans to offer an exchange of crude oil from theStrategic Petroleum Reserve to companies willing and able toprovide up to two million barrels of emergency heating oil and thenecessary Northeast storage facilities in time for the heatingseason. The crude oil will come from the Reserve’s West Hackberrysite in Louisiana and will be offered through the Defense EnergySupply Center, an arm of the Department of Defense that routinelyprocures petroleum for the military. The Center will issue asolicitation within the next to weeks that will specify the termsand deadlines for the program. The DOE wants the heating oil instorage by October.

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