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Energy Department Acting to Ease
Recent Surge in Oil Prices

By H. Josef Hebert   Associated Press
WASHINGTON — The Energy Department will delay deliveries to its emergency oil reserve in hopes of easing the recent surge in fuel prices and will closely monitor heating oil markets, Secretary Bill Richardson said Wednesday.

The administration has been under pressure to act as oil prices have edged close to $30 a barrel from a low of less than $12 a barrel a year ago. Also, heating oil and diesel fuel prices have risen rapidly.

The department will renegotiate contracts to postpone delivery on 5 million barrels of oil for the Strategic Petroleum Reserve in Louisiana and Texas, he said.

"Given today's market conditions, it simply makes sense," Richardson said.

The action is intended to put more oil into the market and ease prices. But many economists question whether it would have much impact.

The move came a day after Richardson ruled out releasing oil already in the emergency reserve to influence the oil markets, saying the reserve should be used to deal with supply emergencies and should not be used to manipulate the markets. No withdrawal from the reserve is planned, officials said.

The government is in the process of accepting 28 million barrels of oil as a "royalty-in-kind" payment from producers drilling on government land. About 10 million barrels have been delivered, but delivery of the next 5 million barrels will be postponed, Richardson said.

"The companies have indicated a willingness to discuss putting additional oil into the SPR (later) if we postpone delivery dates," he said.

Energy experts question whether a relatively small release of oil from the reserve or diversion of deliveries greatly would affect prices.

Robert Ebel, director of energy and natural security at the Center for Strategic and International Studies, a Washington think tank, said only a huge release of oil would have a major effect.

"I don't think that's politically doable," Ebel said at a recent energy conference.

In the Republican presidential campaign debate Wednesday night, Texas Gov. George W. Bush, the GOP front-runner, said he would not dip into the strategic oil reserve to reduce fuel prices, saying the stockpile is designed to help the nation weather a national emergency. Instead, he said the president must "jawbone" oil producing nations and persuade them to drop prices.

The Strategic Petroleum Reserve holds about 580 million barrels, equivalent to 62 days of oil imports.

Richardson said his department would more closely monitor the heating oil markets to "make certain that ... oil product suppliers can move heating oil to those who need it most."

Richardson said he planned to meet next month in Boston with state officials and industry representatives to examine why the rise in heating oil prices.

Also Wednesday, the president of the American Trucking Associations urged President Clinton to withdraw oil from the government reserves to counter soaring prices in diesel fuel.

Walter McCormick, the ATA's president, said in a letter that diesel fuel, which is made from the same distillate as heating oil, jumped 47 percent the past year, including an 11-cent increase last week. Heating oil prices have nearly doubled in some parts of the Northeast in recent weeks.

Meanwhile, Richardson said the president would seek $154 million in the 2001 budget to help poor families make their homes more energy efficient. The administration since 1997 had sought that amount each year, but Congress has provided less each time, including $135 million this year.

On Tuesday, the White House announced it was making an additional $45 million available for low-income families to purchase heating oil. The money is going to Northeast states and Alaska.

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