The US Is Lending Out a Third of the Northeast's Emergency Heating Oil to Fight Prices for the First Time

Heating oil costs are up more than 70% from a year ago, and in the Northeast winter is weeks away. On October 21, the Energy Department said it will lend out up to 315,000 barrels from the Northeast Home Heating Oil Reserve to push those prices down.

That is about a third of the 1 million barrel reserve. In its 26 year history the stockpile has been released only twice, most recently after Hurricane Sandy. It has never been used to lower prices until now.

A loan, not a giveaway

The oil is not being sold. Under the department's request for proposals, companies borrow ultra low sulfur distillate and must return the same volume plus a premium, so the reserve is refilled before the 2027 to 2028 heating season. The premiums rise from 5% to 22.5% the later the oil comes back, with return periods running from January to September 2027.

The barrels sit in South Portland, Maine; Boston; and New Haven, Connecticut. Offers must be at least 25,000 barrels, no single site will give up more than 150,000, bids are due at 11 a.m. Central on Tuesday, October 27, and deliveries must be complete by November 13. The department says the exchange is "structured to mitigate supply chain challenges disrupting fuel oil supply."

Maine asked first

The move answers a September 22 letter from Maine senators Susan Collins and Angus King. Their offices say 315,000 barrels amounts to a 13% supply increase for New England.

"Approximately half of Maine households rely on fuel oil to heat their homes," Collins said, adding that she has repeatedly urged the administration "to use every tool to increase supply and lower energy prices." She says she also worked with the department on releasing 50 million barrels of diesel and 50 million barrels of crude over the next four months.

King tied the squeeze to the war. "Maine has been hit especially hard by the run up in fuel prices since the beginning of the Iran War," he said, calling the cost of heating oil "absolutely through the roof" in one of the most dependent states in the country. He welcomed the release but said the pressure to bring prices down "before winter really sets in" would continue.

The war has kept crude climbing, with oil topping $111 after Houthi attacks on Saudi targets. The reserve's ultra low sulfur distillate is the same spec as most diesel, and AAA puts the US average for diesel at $6.31 a gallon, above $6 for weeks after a record $6.52 on September 22.

The pipeline pitch

Energy Secretary Chris Wright called the exchange "a temporary measure to solve a temporary supply disruption." Then he used the moment to press an old fight, urging the governors of New York and New England to work with the administration to build the Constitution Pipeline and replace home heating oil with natural gas, which he said would save residents billions.

The emergency cupboard is getting thin elsewhere too. In March the administration agreed to loan 172 million barrels of crude from the Strategic Petroleum Reserve, which now holds about 282 million barrels, its lowest level since the 1980s. The heating oil loan lands weeks before winter, and weeks before next month's midterm elections.

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