American oil refineries appear to be withholding normal shipments of diesel and home heating oil to local distributors even though their own stockpiles are rising, a congressional staff report said yesterday.
The result, the memo suggested, could be a false sense of national security over fuel supplies this fall and spot shortages as demand increases with cold weather.
Reporting to Rep. Berkley W. Bedell (D-Iowa), chairman of the House antitrust subcommittee, staff director Marc Rosenberg writes that the reassuring Department of Energy figures on diesel and fuel oil ignore supplies down the line at the local fuel jobber level.
The DOE's Weekly Petroleum Status Report shows rising and comfortable margins at refineries, in pipelines and in major tank farms, but that does not reflect local supplies, the memo said.
Rosenberg's staff surveyed local dealers in Iowa, getting 25 responses out of 216 letters sent, and confirmed the results with checks elsewhere, the report continued. Many jobbers report low inventories of home heating oil, reduced shipments from refiners and shortfalls in their ability to maintain normal summer refill schedules, it said.
"We are observing a national pattern, not merely local phenomena," the report said. "What we are seeing is more a reduction in distribution of product, rather than an increase in overall supply."
Nineteen of the 25 Iowa distributors said they were having problems and discounted the notion that customers were stockpiling oil in their own fuel tanks. In a meeting with Bedell, 20 New York dealers complained of similar difficulties, while another group of jobbers told Rep. Peter Kostmayer (D-Pa.) the same thing.
Preliminary results from a National Oil Jobbers Council survey of its 6,000 members confirmed the findings, and further polls of distributors in Maine and elsewhere are expected to do likewise, the report concluded.
"A dry August, raising diesel fuel requirements for irrigation in the Great Plains...a wet autumn, compressing the harvest season and creating peak demands for diesel in the Midwest...an early frost in New England...these are some of the scenarios that could result in spot shortages in diesel or home heating oil in the next few months," Rosenberg wrote.
He added that New York distributors had noted a 12-cent-per-gallon rise in the price of home heating oil since the beginning of the summer. They speculated, Rosenberg said, that shipping delays now mean higher prices later for the refiners. "Demand for home heating oil cannot change very much, but the price certainly can," he said.
The memo quoted an unnamed oil distributor in Blencoe, Iowa, who wrote: "Normally at this time of year I am thinking of heating oil and harvest...this year I am trying to store as much heating fuel as possible during these slow farming months, but allocations have been cut so drastically that that is impossible.
"My family has served this community in the oil business for 50 years, making a good living doing so," the dealer wrote, "but today with the government's bungling and bureaucracy, customers complaining and mistrust, and oil companies' high profits and independence, I would sell out if I could find someone who wanted into this rat race."