U.S. plans to loan one-third of heating oil reserve to tame prices

The Trump administration is offering to loan up to nearly a third of the U.S. emergency heating oil reserve, the Department of Energy announced on Wednesday, in an attempt to combat soaring prices. The move, initially reported by Reuters, was prompted by senators from both political parties calling for the release of heating oil from the reserve.

Heating oil, similar to diesel fuel, has reached record prices above $6.50 per gallon due to disruptions in the Middle East following the Iran war and Ukrainian attacks on Russian refineries. The administration will assess whether additional releases from the reserve are needed. The U.S. has only tapped the Northeast Heating Oil Reserve once since Hurricane Sandy in 2012.

This stockpile, located in New Jersey, Connecticut, Massachusetts, and Maine, is crucial as about one-third of New England homes, including half of homes in Maine, use heating oil. The administration aims to lower energy costs ahead of the Nov. 3 midterm elections, as the issue has become a key concern in several tight Senate races.

Energy Secretary Chris Wright emphasized the administration's commitment to addressing these costs. A competitive bidding process will determine how the loans are distributed to fuel retailers and terminal holders to ensure fuel reaches areas with shortages. While Senator Susan Collins welcomed the move, stating it would increase the supply by 13% in New England and lower heating oil costs, analysts remain skeptical.

Tom Kloza, chief energy adviser at Gulf Oil, called the measure "puzzling and probably inconsequential," predicting no impact on prices. The loans, up to 315,000 barrels from Maine, Massachusetts, and Connecticut, are set to be delivered by Nov. 13. The administration has already loaned 172 million barrels of crude from the Strategic Petroleum Reserve to address crude oil price increases caused by the Iran war.

Additionally, the administration supports the Williams Companies' Constitution natural gas pipeline project, which would deliver natural gas from Pennsylvania to heat homes in New York and New England, despite New York's environmental objections.