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WASHINGTON -- Prices for heating oil and gasoline are soaring and likely to keep rising as energy markets cope with a colder than expected winter, the loss of Venezuela's production and worries about war with Iraq.
A deep freeze in the Northeast caused heating oil prices to spike by 20 percent last week. The Energy Department, citing low stocks -- as well as higher natural gas prices -- said heating bills could be 50 percent higher this year than last winter.
Consumers are getting hit at the gasoline pumps as well.
Nationally, gasoline prices increased for the ninth straight week to an average of $1.61 a gallon for regular grades, 51 cents a gallon higher than a year ago, according to the federal Energy Information Administration. Many parts of the country have seen price hikes of 20 cents a gallon in recent weeks.
Crude oil on Friday moved above $35 a barrel, the highest it has been in two years. Government analysts forecast that prices probably will stay above $30 a barrel this year, even if a war is avoided in Iraq.
The price of light sweet crude was $34.78 per barrel at noon Monday on the New York Mercantile Exchange.
Although OPEC oil producers have boosted production, they have yet to make up the oil lost to political unrest in Venezuela. Crude inventories fell "well below the low end of the normal range" at the end of January, said the Energy Department. With high crude prices and some shortages, refiners scaled back operations, choosing to perform normal maintenance a few weeks early, some analysts said.
That has caused suppliers to draw heavily on heating oil stockpiles, causing prices to jump. On Friday, wholesale heating oil prices on the New York exchange soared to $1.20 a gallon, a jump of 30 cents from a week earlier.
After a New Hampshire terminal couldn't get heating oil for four days, Jack Sullivan, chief executive of the New England Fuel Institute, warned in a letter to the Energy Department of "a supply and pricing crisis" if more heating oil isn't made available.
"The demand is extraordinary. It's absolutely horrific," Sullivan said in an interview Monday. His organization, which represents 1,000 heating oil companies, urged the government to release stocks from an emergency heating oil stockpile. No decision on such a release has been made.
Economists say that the supply crunch and price spiral stem from a variety of factors, especially unease over war with Iraq and the possibility that Kuwaiti and Saudi production could be disrupted.
"The dramatic price rise we've seen in the last couple of weeks is primarily associated with fear about war in Iraq, the disruption of oil exports from Venezuela and extremely cold weather," said Kyle Cooper, an energy analyst for Smith Barney.
Heating oil stocks in the Northeast are 35 percent below the 10-year average, according to the American Petroleum Institute. Gasoline stocks, while still at comfortable levels, fell 3.4-million barrels last week, the government said.
If the cold winter persists, refiners will need to keep up the heating oil supply and postpone making gasoline. If so, gasoline inventories may not recover, leading to higher gas prices this spring and summer, analysts said.
"Oil markets now are as tight as a fully stretched rubber band," said an Energy Department analysis. "Whether the rubber band breaks or not will largely depend on the pace of demand in coming weeks."