10 February 2003
Cold weather, strike propel heating-oil prices 20%
New York City - Heating-oil prices jumped nearly 20% last week as Venezuela's oil strike continues to roil energy markets and freezing temperatures grip the Northeast. The Department of Energy predicted winter heating-oil bills would be 52% higher than last year The Wall Street Journal reported.
During the past week, the price of a gallon of heating oil shot up by 18 cents to $1.10 on futures markets. Supply terminals have struggled to find product to satisfy higher demand, and with little relief in sight, a group of 1,000 heating-oil companies on Friday requested the release of heating-oil supplies from an U.S. strategic reserve in the Northeast.
The sudden price rise is part of a broader surge in energy prices, with the cost of gasoline and natural gas prices also climbing. The surge stems from rising crude-oil prices, which have surged more than 30% since late last year because of a continuing oil workers' strike in Venezuela and fear of an U.S. attack on Iraq.
Oil prices spiked to more than $35 a barrel Friday, to highs not seen in two years, and the Department of Energy's statistical arm, the Energy Information Administration, predicted $30 oil for the rest of the year.
That counters prevailing opinion that oil prices will fall later this year on increased supply and a resolution to the standoff with Iraq. It is also likely to renew concerns about the prospects for a swift U.S. economic recovery.
Extremely low crude-oil inventories are inflaming prices of refined products such as heating oil and gasoline. According to the EIA, U.S. crude-oil stocks fell to 274 million barrels, only four million barrels above what is considered the "minimum operating level" by U.S. officials and 46 million barrels below the same period last year.
The low crude stocks have forced refiners to cut production, pushing up the price of gasoline. The average price of unleaded gasoline is $1.53 a gallon, up 11 cents since January and 43 cents higher than a year ago. Analysts say summer pump prices are likely to rise even higher as demand for gasoline increases. Refiners normally begin building gasoline stocks in late January but have been unable to build much because of thin crude supplies.
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