Wintertime heats up petroleum prices; Costlier heating oil but plentiful gasoline
Supplies of crude oil are ample, so why are retail prices of gasoline and home heating oil beginning to shoot up? The answer is complex, but the bottom line is that American families are going to pay more this winter and next year to run their cars and, for those who heat their homes with oil, a lot more to keep warm.
This will be true, analysts agree, even if the winter is not abnormally cold and if supplies from the troubled Middle East continue to flow at about the present pace.
At the heart of the matter is a link between gasoline and fuel oil in the refining process, a fact not widely understood by the pulbic.
Crude oil, as it runs through a refinery, comes out as a variety of products -- gasoline, distillate fuel oil (home-heating and diesel fuel), residual fuel oil (for utilities and factories), jet fuel, and a number of others, including petrochemical feedstocks for the plastics industry.
The most plentiful outcome of this process is gasoline. More than two barrels of gasoline are produced for every barrel of home-heating and diesel fuel.
Refiners can vary the gasoline-distillate formula by 5 to 10 percent, according to the American Petroleum Institute (API), but not by more. So, as refiners crank out more heating oil this winter, they also are flooding the market with gasoline.
Now consider two other factors:
* Crude oil is going to cost refiners considerably more as time goes on, for reasons largely beyond their control.
* Americans, primarily because of high prices, are burning less oil -- 6 percent less gasoline than they did in 1979, about 15 percent less home heating oil.
Higher costs stem partly from President Carter's progressive decontrol of domestic oil prices, which will add about a penny a gallon monthly to the retail price of fuel through next September.
At that time US oil prices are scheduled to reach the world level, set by the 13-member Organization of Petroleum Exporting Countries.
OPEC, meanwhile, may boost prices above the $30 to $37 a barrel range now prevailing among cartel members. Spot prices, for refined products in particular, already stand above $40 a barrel.
Saudi Arabis's oil, a $30 a barrel, is cheapest among the OPEC partners. Most expensive is the highly prized light crude produced by Libya, Algeria, and Nigeria.
An OPEC meeting at Bali, Indonesia, in mid-December may result in a $2 a barrel hike by the cartel, some analysts believe. OPEC members themselves are divided on whether or not to raise prices at this time, though they agree that prices will climb next year.
This combination of rising costs will inflate retail fuel prices, despite the good showing of Americans at energy conservation.
For many families, it is harder to cut back on the use of heating oil than on gasoline, especially as cold weather deepens across the northern part of the nation.
Unfortunately for these families, experts agree, heating oil prices are likely to climb faster than the cost of gasoline at the pump as teh winter goes on.
Competition has kept gasoline prices relatively stable during much of 1980, certainly below the level of inflation for many other goods.