Today, I will describe the current situation in regard to heating oil and what it portends for the winter, report on what we have already done to improve our preparedness and suggest some of the actions under consideration that might further improve our preparedness. Compared to other refined petroleum products such as gasoline or diesel fuel, this is a limited market both in dollar volume and geography. Heavy demand and high prices for these other products reduce the incentives of refiners to produce heating oil until the price gets comparably high. Outside the New England and Mid-Atlantic regions, these proportions are radically different. Heating oil is hardly used at all.
Natural gas provides for the bulk of space heating.
As a result of these consumption patterns, much of the heating oil we consume is refined in the fall and immediately delivered to the market for consumption in the winter. However, a critical portion of our consumption comes from amounts that have been placed in short-term storage usually built up over the preceding spring and summer. Inventories are important because they provide a buffer in times when deliveries to the region are interrupted due to severe weather or other disruptions in the supply chain. These severe weather events are usually accompanied by surges in demand and as a result the price at wholesale and retail levels. As you know, crude oil prices continue to remain very high.