I didn't know we had one . . . . . .
Posted by Heading Out on October 3, 2005 - 9:24pm
Congress five years ago created a 2-million-barrel Northeast heating oil reserve that is to be used in case of supply shortages or delivery problems in nine states from Maine to Pennsylvania. Fuel oil is widely used in the Northeast to heat homes and businesses.The government stockpile of heating fuel, which is rotated regularly while held at private terminals in New York Harbor and Connecticut, has never been used.
Bodman said that a decision to release additional government stocks of crude oil, or for the first time tap the government's Northeast heating oil reserve, will be considered by Bush.This may indicate that the realisation as to the seriousness of the GOMEX situation is now rising to higher levels. Since the supply is very obviously cited for the benefit of the North East, one wonders how this might tie in with needs in the upper Mid West, to pick just one place. And who decides what? So far in the selling of the oil from the SPR those who have asked have been given, since the numbers have not reached the limits that were set. Of course this also relates to the type of crude that the refineries want, since there is now some surplus Mexican oil around, as was posted last night."We are prepared to do what is necessary with regards to the strategic reserves," Bodman said, adding that the president has indicated "he is prepared to do whatever it takes" to meet supply needs.
Does price now decide who gets what ? It will be interesting to see how this works out - after all how far west do we have to move to be no longer considered part of the North-East?
More information on the reserve from the EIA and for those who can't be bothered with the Salon advert here is the same news from China, with more information as to how it came about here.
This is today's pleasant surprise, Slate carries a story about the unpleasant one, the rising cost that the heating oil will carry. (Interesting question I wonder who sets the price that the government will sell its oil for ?]. The story points out that heating oil is bought in large chunks, and thus the impact of the price increase is more severe. Given also that it is pre-purchased - you fill your tank normally ahead of the storms - one wonders if the price will leave more people buying less and gambling on a milder winter. Which is not, I don't think on the cards this year. This could be the precursor to some difficult winters ahead, but if this is relatively mild it may be a sufficient wake-up call to get a broader discussion on a long term plan, rather than just relying on temporary fixes that may not always be there. UPDATE: Poten has an interesting story in pdf format about the shipping of oil around the country.
Six foreign flag vessels were reported fixed to carry cargoes from New York to the U.S. Gulf, an extremely unusual situation since cargoes are normally fixed from the U.S. Gulf to the Northeast. These cargoes were intended to take advantage of the differential in gasoline prices between New York and Houston. All but one of these fixtures failed because congestion is at such a high level in Gulf coast ports that the financial incentive would be eaten away in demurrage charges. However, the price differential is causing a diversion of cargoes destined for the Northeast to the U.S. Gulf.. The article goes on to point out the impact of the lack of handling facilities in the Gulf may have on shipping availability in the future. And this is still in the early days of the situation.
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Northeast Heating Oil Reserve
On July 10, 2000, President Clinton directed the Department of Energy to establish the Northeast Heating Oil Reserve. The reserve is intended to reduce the risks presented by home heating oil shortages, such as the ones experienced in December 1996 and January-February 2000.
Maximum inventory of heating oil in the reserve will be two million barrels. The Department of Energy believes that a two-million-barrel reserve will provide relief from weather-related shortages for approximately ten days, which is the time for ships to bring heating oil from the Gulf of Mexico to New York Harbor. Inventory for the reserve was acquired by exchanging crude oil from the Strategic Petroleum Reserve for heating oil to be delivered to the storage facilities.
For more information on the Northeast Heating Oil Reserve, please contact Mr. Nathan Harvey from the Office of Petroleum Reserves at (202) 586-4734."
I might call Mr. Harvey to ask if he thinks those ships from the Gulf of Mexico are really coming.
Has some good stuff see there "down for the count"
http://www.gulfnews.com/Articles/BusinessNF.asp?ArticleID=184920
http://money.cnn.com/2005/10/03/pf/reader_gas_prices/index.htm?cnn=yes
I always thought most victims of strangulation cope by dying. Hmmm.
The Midwest could still be screwed, though. They're big on natural gas heat there. The choice will likely end up being between electricity and residential heating. Rolling blackouts during cold snaps. We came close to it a couple of years ago. And that was a relatively mild winter, with a relatively cool summer before it.
The arithmetic is simple: if you assume each household uses at least 600 gallons of heating oil per heating season, then your 2 million barrels would cover roughly 140,000 households. As there are roughly 50 million people in what is generally considered to be the Northeast, and if we assume 4 persons per household, then we have roughly 12.5 million households. On that basis, this reserve could provide heating oil to only a little over one percent of the total number of households in the Northeast.
That doesn't seem like much of a cushion to me.
The Farmers Almanac seems to be projecting a mixed bag with cold in the northeast, south and midatlantic regions, and around the Great Lakes in Jan-Feb. The Farmers Almanac claims better skill (80-85% accuracy) but I wouldn't bet on either forecast being right.
In any event, after all the talk of global warming's contribution to the ferocity of hurricanes, it'll be high irony if expectations shift to the "benefit" of a warm winter...
The mean temp in Chicago in Jan is 21F, or 31*(65-21) -> 1364HDD.
The mean temp in Tokyo in Jan is 38F, or 31*(65-31) -> 806HDD
Or Chicago has 69% more HDD compared to Tokyo; but it seems a bit bogus to me. I assume having an average temp. below freezing is very different from one above freezing. I'd assume that the cost change isn't linear.