Heating oil reserve opens for loans to ease US fuel prices

Washington plans to lend out nearly a third of the US heating oil reserve, as the Trump administration looks for ways to cool fuel prices.

The offer covers up to 315,000 barrels from the roughly 1-million-barrel heating oil reserve. Stocks at sites in Maine, Massachusetts and Connecticut would supply the barrels, the department said.

Officials plan to finish deliveries from the heating oil reserve by November 13.

Why the heating oil reserve is in play

Prices have jumped because diesel is scarce. The wars in Iran and Ukraine disrupted supply, and the Iran war in particular has hit shipments from across the Middle East. Diesel, which comes from the same refining stream as heating oil, has climbed to records above $6.50 a gallon.

Senators from both parties asked the administration to release fuel from the reserve. A source at the department said the team will assess whether it should release more.

This is a rare step. Washington has used the Northeast stockpile only once since Hurricane Sandy hit the region in 2012. The fuel sits in New Jersey, Connecticut, Massachusetts and Maine.

How the heating oil reserve loan works

Energy Secretary Chris Wright said the administration is “committed to doing everything in our power to lower energy costs.”

A competitive bidding process will pick who gets the barrels. Fuel retailers and terminal holders can both apply, which lets fuel flow toward areas facing shortages.

Officials say the loans should let heating oil move into regions where supply runs short, because bidders can start trading it soon after they win.

The political stakes

Heating costs have turned into a key issue before the November 3 elections. About a third of homes in New England burn heating oil, and in Maine the share reaches about half.

Several close Senate races hinge on voters who worry about winter bills, so the heating oil reserve has become a campaign topic. Republican Senator Susan Collins of Maine faces a tough fight for re-election. In New Hampshire, Democrat Chris Pappas and Republican John Sununu are competing for an open seat. In Alaska, Republican Senator Dan Sullivan faces Democrat Mary Peltola.

Republicans are trying to keep control of both chambers of Congress, so any relief at the pump or in the boiler room matters to them.

Separately, the administration is backing a natural gas pipeline called Constitution, built by the Williams Companies. It would carry gas from Pennsylvania to New York and New England. Earlier this week, the government freed up to $42 million in Cold War-era Defense Production Act money for first-stage work. Even so, New York has blocked the project over environmental concerns.

On crude, the administration has already agreed to lend 172 million barrels from the Strategic Petroleum Reserve. That crude stockpile, kept along the Texas and Louisiana coasts, now sits at its lowest point since 1982.

For now, the heating oil reserve loan gives New England a short-term cushion, and the administration says it will study more releases if prices stay high.