Heating Oil Crisis Ends As Prices Decline Again;Agency: Rise Was Predictable Response to Cold
Propelled suddenly upward by as much as 50 percent in December's record-breaking cold wave, prices have receded rapidly after a mild January and balmy February in much of the Northeast. Wholesale prices are back to where they were in November. Retail prices have declined less quickly, but are well below late December levels.</br></br>In the wake of the rapid price movements, several federal, congressional and state investigations are still trying to determine whether the surge was engineered by the oil industry to increase profits, but the U.S. Energy Information Administration has concluded that it was a predictable response to a sudden very large increase in demand.</br></br>"In the face of extraordinary and unexpected increases in demand," EIA said in a recent report to Congress, "petroleum markets performed as might have been expected: The distribution system responded to temporary imbalances in supply and demand through higher prices, which were quickly followed by increased supplies and declining prices, approaching those of last November."</br></br>In the Washington area, where the price of home-delivered fuel oil soared from less than $1 per gallon to nearly $1.40 between Nov. 1 and Christmas, Steuart Petroleum Co. quoted a price of $1.149 this week. Another major distributor, A.P. Woodson Co., was charging $1.069.</br></br>"Prices have come down faster than anyone believed they would," said Philip R. Chisholm, executive vice president of the Petroleum Marketers Association of America. "Retail prices would have come down faster, except that during the last week in December {when stocks had been depleted and wholesale prices were soaring}, a lot of distributors built inventory at very high prices. Then the sudden surge of warm weather left that expensive oil in the inventory through the first week of December." "I think it's over," John Lichtblau, director of the Petroleum Industry Research Foundation, said of the heating oil crunch. "Prices collapsed in January just as they soared in December. There was a buildup of inventory and suddenly nobody wanted the oil."