Rising oil prices: Washington listens as consumers squawk

February 16, 2000
Web posted at: 1:22 p.m. EST (1822 GMT)

In this story: Tap oil reserve? Public speaks out at energy summit $1.41 a gallon -- and climbing? Energy secretary to visit oil producers SUV slump? RELATED STORIES, SITES

From staff and wire reports

BOSTON (CNN) -- Amid steadily rising oil prices that have boosted the cost of gasoline and slammed consumers dependent on home heating oil, the federal government is stepping in to help out. Meantime, gas-guzzling sport utility vehicles are going unsold on dealer lots.

POP QUIZ How many U.S. gallons are in a barrel of oil? 31 31.5 42 55   MESSAGE BOARD Rising oil prices

Higher energy prices have led to speculation that President Clinton might release oil from the country's strategic petroleum reserve. The move would offset oil price increases that have put the price above $30 a barrel for the first time since the eve of the Persian Gulf War nine years ago.

Without confirming what action Clinton is considering, Energy Secretary Bill Richardson told CNN Wednesday that the president is "contemplating some initiatives."

Clinton said Tuesday he is willing to give more help to families "that are really getting hurt" by the soaring cost of home heating oil in New England and the Middle Atlantic states.

So far, the government has released $200 million from the Low Income Home Energy Assistance Program. "We can release more," Clinton said.

But releasing oil from the U.S. stockpile may -- or may not -- be what Clinton had in mind.

"The strategic petroleum reserve is used for national supply emergencies for a really rainy day," Richardson told CNN. "This is a price problem. We don't want to manipulate energy markets."

However, asked Tuesday about his plans, Clinton said: "I have not closed off any options."

The reserve, which holds 569 million barrels of crude, was created by Congress in 1975 after the Arab oil embargo.

The administration is considering an Energy Department proposal to lend millions of barrels of crude oil from the petroleum reserve to energy companies, who would then sell it on the open market. The firms would agree to replace the reserve oil with even more barrels within a year.

Richardson confirms what motorists fear: gas prices may rise even more 393K/39 sec. AIFF or WAV sound

Richardson was in Boston on Wednesday to host an energy summit, giving homeowners a chance to complain about rising heating fuel prices and allow oil distributors to explain why supplies are so tight and expensive.

"I want to find ways that we can do something about low income energy assistance ... how to improve transportation of home heating oil to the areas most in need, how to make sure the Coast Guard can get some of this (oil-carrying) vessel traffic through to New England," Richardson told CNN from historic Faneuil Hall where the public hearing was being held.

The Northeast, which is the world's biggest heating oil market, has seen heating fuel prices soar above $2 a gallon in many cities, more than double the price from a year earlier.

"We're here to try to find ways to, perhaps, encourage utilities to switch to natural gas so that we're not so dependent on home heating oil in this region," Richardson said.

Throughout the United States, gasoline prices now average $1.41 a gallon and could stay high into the summer travel season, even if the Organization of Petroleum Exporting Countries (OPEC) agrees at a meeting next month to boost production.

Part of the problem is that U.S. refineries normally increase production of gasoline during the first three months of the year in anticipation of higher demand in the summer. That's not happening this year because the high crude prices and short supplies have prompted many refiners to cut back operations.

With gas inventories so tight, it will take time to bring supply in line with demand, analysts say. Some analysts even predict pump prices will go up to $1.60 and $1.70 per gallon before the problem eases.

"We do think prices will go up a little bit, but in the end we do think gasoline prices will stabilize," Richardson said.

Unhappy with what they're paying at the pump, Americans already are talking about curtailing their driving just as resorts and other vacation spots are starting to gear up for summer.

Morgan Stanley Dean Witter Managing Director James Valentine says that higher oil prices will stunt companies' growth 176K/16 sec. AIFF or WAV sound

In Houston on Tuesday, homemaker Lydia Gamos filled up her Honda with gas at $1.45 a gallon and complained, "It certainly does hit you in the pocket."

She said she was holding her driving to "just the minimum ... at least until it gets a little cheaper."

Mike Fox, 33, manager of a non-profit agency in New York, was filling up at a midtown Manhattan Amoco station.

"It's ridiculous at this point," he said. "I do as little driving as possible because it's so expensive."

Gasoline prices have been rising steadily since last March, when OPEC cut crude oil production by 7.5 percent, or more than 2 million barrels a day, to try to boost prices that had fallen to 12-year lows.

Analysts believe that OPEC will come under increasing pressure -- especially from industrialized nations such as the United States -- to raise production at next month's meeting.

Richardson is to meet with Mexico's energy minister this weekend. Although not an OPEC member, Mexico has worked closely with the cartel and joined their production cuts during the past year.

After that, the U.S. energy secretary will fly on to the Middle East to speak with OPEC heavyweights Saudi Arabia and Kuwait, then hold sessions with the oil ministers of Norway and Venezuela.

Richardson told CNN he would "talk to OPEC and non-OPEC members about the importance of ... having more supply of oil on the market."

"I think we can reason with them," he said.

Whether due to higher gas prices or a glut of models, sport-utility vehicles are starting to stack up in dealers lots, the Wall Street Journal said Wednesday.

The supply of the vehicles, known as SUVs, rose to 81 days last month, up from 70 days a year earlier, the Journal said, quoting statistics from Autodata Corp., an auto-industry research group.

The supply of Ford Motor Co.'s Excursion, introduced a few months ago, now reaches 76 days, up from 48 days in December, the Journal said.

Dealers of DaimlerChrysler's Dodge Durango, its biggest SUV, now have a 99-day supply, more than double the 43 days a year earlier, the newspaper said.

Sales of SUVs, pickups and other trucks are still growing, but that growth has slowed, the Journal said.

Correspondent Greg Clarkin, The Associated Press and Reuters contributed to this report, written by Jim Morris.

Oil prices holding high, for now
February 10, 2000
Oil stocks slide on Opec fears
September 21, 1999
Oil set to top $14 next week?
March 16, 1999
California blasts BPAmoco
February 7, 2000

U.S. Department of Energy
  • Fossil Energy - Strategic Petroleum Reserve Profile
Low Income Home Energy Assistance Program
Organization of Petroleum Exporting Countries - OPEC
Oil.com - Web directory for oil and gas industries.
Interstate Oil and Gas Compact Commission
Global Oilfield & Petroleum Directory
OilOnline.com

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.