The United States was delivered a stark reminder of its fragile energy supplies Thursday after an upsurge in violence in the Middle East sent prices for scarce home heating oil vaulting beyond Gulf War highs. Heating oil jumped to its highest level for nearly 20 years on the benchmark New York Mercantile Exchange more than reversing falls made after the Clinton administration's September release of oil from the Strategic Petroleum Reserve in an effort to mollify markets. While Israel and Palestine produce barely any oil, dealers said they feared the escalating violence in the West Bank and Gaza Strip could raise tensions in surrounding Arab countries and disrupt crude oil supply to the West threatening another blow to an already punch-drunk U.S energy situation. United States crude oil and refined product prices have become increasingly volatile in the 18 months since producer group OPEC heavily cinched back its exports, bringing national crude inventories close to 24-year lows. A looming lack of winter heating oil has become the growing concern as rising demand for energy and a dearth of new investment in the domestic U.S. supply system means that refineries and pipelines are having to strain at full capacity just to keep up with everyday needs.
People are very concerned over what the Mideast violence is going to mean.
The strained supply situation, punctuated by some of the highest gasoline prices ever seen this summer and predictions of a heating oil crunch this winter, has left the White House scrambling for solutions. In addition to the release of SPR crude oil, the Clinton administration has announced the set up of a two million barrel emergency heating oil reserve in the Northeast, and has initiated discussions with states over whether to loosen clean-air rules on home heating fuels to keep costs down and supplies up. The Department of Energy reported early Thursday that national heating oil stocks fell 1.3 million barrels last week to 46.6 million barrels, and were a third below last year. And demand for the winter fuel is expected to be strong this year with the U.S. government weather scientists on Thursday saying that the recent string of record warm winters experienced by the United States may be over, and forecasting a return to normal colder temperatures for the upcoming season. In its winter outlook, the National Oceanic and Atmospheric Administration forecast that the Northeast region could see average temperatures 4 degrees Fahrenheit colder than during the last three winters.