The Energy Information Administration (EIA) “projects residential heating oil prices to average $3.71 per gallon during the winter season, 33 cents per gallon more than last winter, and the highest average winter price on record (although lower than the record heating oil prices realized during the summer of 2008 when crude oil and all petroleum product prices hit their peak).” Heating oil is a middle distillate fuel and includes diesel, kerosene and jet fuels.
Home heating oil prices are climbing due to export demands. “World need for distillate is expected to grow faster than that for gasoline, which can present continuing opportunities for U.S. middle distillate fuel exports for some time.”
The figure below illustrates the increase in distillate exports from June 2006 until July 2011.
While middle distillate exports have increased, oil companies have received approximately $41B per year in subsidies. “That amounts to more than half – 52 percent – of total benefits distributed to energy sectors by the federal government.”
Meanwhile, “Senator Charles Schumer says the state (New York) could lose 85 million dollars in funding for The Low Income Home Energy Assistance Program if a new proposal from the House of Representatives benefiting warmer states is passed…Schumer says the price per gallon for home heating oil has risen more than 23 percent in the city… The program helps more than 700,000 city households pay utility bills.”
Recommendation: Oil companies are making profits from exported distillate fuels and federal subsidies, while state and city government are vainly attempting to provide heating oil assistance to financially stressed families. Although oil companies are free to sell products to whomever, nevertheless they are not entitled to totally unnecessary subsidies. Some portion of those subsidies could be diverted to poor families for home heating oil payment assistance, while the remaining subsidies could support renewable energy R&D, especially to decrease the levelized cost of electricity (LCOE) generated from solar PV and off shore wind. Please see my previous post on LCOE.Tags: Distillate Fuel Exports, Home Heating Oil, LCOE, Levelized Cost of Electricity, Oil Subsidies, SBIR, Senator Charles Schumer