The U.S. Department of Energy announced that in order to combat the sharp rise in prices before the winter season begins, it will provide 300,000 barrels of heating oil from strategic reserves as a loan to four companies, responding to the energy market in the country.
Disruption in Energy Supply and Price Increases
This action follows disruptions in energy supply from the Middle East due to the U.S. and Israeli regime's war against Iran and the unprecedented rise in diesel prices to $6.50 per gallon. Senators from both political parties in the U.S. have urged the government to draw from the strategic reserves of heating oil.
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Details of the Heating Oil Loan
The amount of heating oil to be loaned is approximately one-third of the country's total strategic reserves of one million barrels. The U.S. Department of Energy also announced that the requested fuel will be sourced from home heating oil reserves in the Northeast and from storage facilities in Boston and New Haven. The transfer or delivery will be completed by November 6.
Kyle Hastwit, Deputy Secretary of the U.S. Department of Energy, highlighted the importance of this action in a statement, saying: "This action helps alleviate the disruption in fuel supply and, while providing heating in the Northeast, will maintain the long-term readiness of heating oil reserves in the region."
Receiving Companies and Return Conditions
According to the signed contracts, the companies 'Global Companies LLC', 'Sprague Operating Resources LLC', 'Trafigura Trading LLC', and 'Vitol Inc' are required to return the amount of heating oil received along with an additional amount to ensure the replenishment of reserves before the peak of the cold season next year.
Since Hurricane Sandy in 2012, the U.S. has only used home heating oil strategic reserves once in the Northeast. Emergency storage tanks are located in facilities in New Jersey, Connecticut, Massachusetts, and Maine.
About one-third of homes in the New England region and about half of homes in Maine use heating oil.
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