- The Washington Times - Thursday, August 24, 2000

President Clinton said yesterday he will try in an overseas trip this weekend to convince Nigeria and other OPEC members to increase oil production and ease soaring gasoline and home energy prices.
Addressing another flare-up of this year's politically sensitive energy crunch, the president said he is speeding $2.6 million in aid to low-income California residents to help pay electricity bills that have doubled in many areas as people turned up their air conditioners this summer.
The president's moves came as crude-oil prices surged to near-record highs in New York again on news that U.S. crude supplies last week dropped close to their lowest levels in a quarter-century. Refiners have not been adding significantly to drum-tight home-heating oil supplies in particular, and many experts are predicting a serious crunch this winter.
"It's scary to think what's going to happen if a cold snap hits the U.S. this winter," said Tsutomu Toichi, director at the Institute of Energy Economics.
Mr. Clinton may have had that on his mind as he discussed plans during a White House press briefing to talk to the president of Nigeria and other members of the Organization of the Petroleum Exporting Countries in the weeks before OPEC's next meeting Sept. 10.
The Northeast suffered a home-heating oil shortage last winter and political analysts consider it crucial to avoid a replay since New York and the other Northeastern states just like California are "must-wins" if Vice President Al Gore is to ascend to the presidency in the fall.
"I'm going to do what I can to keep these prices moderated and to continue to argue to all the OPEC nations that if the price gets too high, they will cause recession in other countries and then the purchases will drop dramatically," Mr. Clinton said.
Japan's flagging economy also has been pummeled by the near-tripling of crude-oil prices since 1998. Some economists think high oil prices could push Japan back into recession. The European Union also is demanding an increase in supplies.
Mr. Clinton is urging OPEC to drive prices back to "the low $20s" from their current highs of more than $32 a barrel. OPEC members have said they would add to supplies if prices jump above $28 for a prolonged period, but so far have failed to keep that promise.
Last month, Saudi Arabia America's closest ally in the oil cartel said it would increase production on its own. It reportedly added about 150,000 barrels a day for a while, but then stopped when prices temporarily declined.
The energy crunch this year has been a rolling one that first hit users of home-heating oil in New England during a January cold snap, and then precipitated record high gasoline prices nationwide in March and again around Memorial Day. Prices for gasoline skyrocketed to more than $2 a gallon in the Midwest in June.
The gasoline crunch touched off a scramble by refineries to replenish stocks, and that appears to have paid off. The average price nationwide for regular, self-service gasoline had fallen to $1.47 as of Monday and was even lower in the Midwest.
But the marathon efforts of refineries to deliver more gasoline stocks to fuel-thirsty drivers this summer had a dangerous side effect, analysts say. It diverted refineries from building their stocks of home-heating oil, as they usually do at this time of year.
As a result, the level of home-heating oil supplies is down a stunning 39 percent from last year to 42.2 million barrels and prices are the highest in a decade. The Energy Department is warning consumers in the Northeast to expect sky-high prices again this winter.
"Even if OPEC announces an increase in production at the next meeting, it's questionable whether that will help the situation," said Chris Schachte, an energy analyst at GSC Energy Corp. in Atlanta. "It's not going to translate into heating oil by the time it gets cold."
The president of Venezuela's state-owned oil company, Hector Ciavaldini, once again rejected calls for increased production, wire services in Caracas reported yesterday. Like other OPEC ministers, he contends that prices are high because of tight stocks in the United States and manipulation by oil speculators. Supplies elsewhere in the world appear to be adequate.
Mr. Ciavaldini said countries in the European Union can move to lower prices dramatically on their own by cutting gas taxes, which represent up to 80 percent of the price of gasoline in some of those countries.
Meanwhile, the independent Energy Information Administration dealt a blow to the Clinton administration's theory that collusion by "big oil" companies caused the June gasoline-price spike in the Midwest.
An agency report this month concludes that the spike was driven mainly by difficulties complying with clean-fuel regulations the Environmental Protection Agency imposed June 1, coming on top of high crude-oil prices, tight gasoline stocks and pipeline disruptions.
"The principal causes were evident," the agency said.
The Federal Trade Commission last month also cited market forces and the EPA regulations in a preliminary report on its investigation into antitrust violations by the oil companies, which was requested by the administration. It said it could not reach a final conclusion, however, until after the elections.

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