Homes and businesses have stockpiled about 1 billion gallons (24 million barrels) of heating oil since last year in a hedge against increased prices and shortages this winter, according to a study released today by Rep. Les Aspin (D-Wis.).
Because the government does not monitor storage at that level, Aspin warned, the United States may be headed for a glut of heating oil if production continues at last year's levels.
While the Department of Energy said 459 million barrels of heating fuel was purchased last year, weather and other historical consumption data reveal that only about 435 million barrels would have been used, the study said.
"That indicates that consumers bought 24 million barrels, or 1 billion gallons, more than was theoretically needed to heat homes, businesses and industry," Aspin said. The rest, he said, must be in storage tanks of jobbers and users.
"The apparent stockpiling shouldn't surprise anyone when you think of the incentives," said Aspin, referring to the recent steep price increases and crude oil supply cutoffs.
He added that the excessive buying could account for the unusually sharp depletion of oil company heating fuel stocks during the past year.
That reported shortage concerned the Carter administration enough last spring for it to lead a drive to increase heating fuel production this spring and summer.
About two months ago, administration officials were worried about low levels of heating fuel in primary stocks, that is, the storage tanks of refiners and large terminal distributors. At the time, there was concern there might not be enough heating oil to last the winter.
But last week, new storage and production figures revealed that production was at 98 percent of last year's levels and that there would likely be an ample supply of heating oil for the winter.
Secondary (and tertiary) users of heating oil -- jobbers and retail users like homeowners -- usually have limited storage capacity. Most have to take several deliveries during the winter. Consequently, they rarely stockpile significant amounts.
For that reason, and because of the enormous difficulty of accomplishing such a study, the government has never kept track of how much heating oil was being held at those levels. It was never thought to be a significant amount.
And, there were few incentives for those users to store much oil. The price for years stayed relatively steady, and the cost of having to keep the oil seemed prohibitive.
But the rapid price increases in recent years, and the growing fears of shortages, have changed that situation. At least some jobbers and larger customers -- like farmers or commercial establishments -- have begun to store as much heating oil as possible. It would pay, for example, for a jobber to store some heating oil from one year to the next if the price doubles during that year.
At the same time, however, such activity distorts government estimates of the amount of heating oil in storage.
Aspin said the government should now "try to get a handle on the extent to which non-oil-industry storage is taking place."
He called for better use of statistical tools to estimate major changes in consumption and spot checks of principal users, such as utilities, major manufacturers and large housing complexes.
Department of Energy officials say they plan to survey secondary and tertiary storage in early September to "see just how much of the stuff is out there."
Industry representatives did not argue with Aspin's estimate that there may be 24 million extra barrels of heating oil in storage. They did point out, however, that that total represents only about 5 percent of a year's total demand.