Oil-Lubricated Politicking

With home heating oil inventories at disturbingly low levels and cold weather approaching, President Clinton on Friday heeded Democratic presidential candidate Al Gore’s appeal and authorized the release of 30 million barrels of crude oil from the nation’s 570-million-barrel Strategic Petroleum Reserve. In making the announcement, Energy Secretary Bill Richardson insisted that the administration’s only purpose is “to make sure that American families are warm this winter.” Politics, he said with a straight face, had nothing to do with it, nor is the release an attempt to influence oil prices. At least the Gore campaign acknowledged that the candidate’s appeal had been run past the White House, where it is said to have accelerated Clinton’s decision.

Prices did indeed just hit a 10-year high, and it has long been clear that oil inventories in general and heating oil stocks in particular are well below normal levels, especially in the Northeast. It has also been clear that the OPEC oil cartel, despite several miserly hikes in output, is in no rush to bring oil supplies more in line with global demand. To do that would be to crimp the exceptionally high profits the producers have lately enjoyed. If the Clinton administration was concerned about keeping Americans comfy this winter it should have tapped into the oil reserve months ago, in time to assure that heating oil stocks could be built up and when it might have been able to sway OPEC to a more responsible course.

The administration’s oil swap plan aims to maintain the integrity of the strategic reserve by requiring oil companies to replace the crude oil they take during the one-month release period. The big question is how effective adding 30 million barrels to inventories--equal to little more than a day and a half of the nation’s consumption--will be. Richardson says refining will yield only between 3 million and 5 million barrels of heating oil, while heating oil demand runs about 4 million barrels a day. Also in question is whether there is enough unused refining capacity to handle additional supplies. In short, the administration’s pledge--on the first day of autumn--to “make sure” that homes are adequately heated this winter may well be more than it can deliver.