The Northern Home Heating Oil Reserve is a critical part of the energy system in place to prevent shortages. This reserve holds two million barrels of home heating oil as a supply guarantee, so that if the heating oil supply is interrupted then the people who need home heating oil for heat can still get it. There is enough heating oil in these reserves to ensure a ten day supply, which is enough time to have more heating oil shipped in. This guarantees that no Americans will go without heat and freeze to death if the heating oil supply is cut off for a short time, or that companies will suffer enormous losses and go out of business, due to severe weather or other problems.
What is the Northern Home Heating Oil Reserve, also simply known as the home heating oil reserve? This is the component of the Strategic Petroleum Reserve that involves home heating oil. Set up in 2000 on the direction of President Bill Clinton, this reserve is in place to prevent any fuel oil disruption in the supply chain. This is important because almost seventy percent of of the homes in the northeast area use heating fuel in the winter for heat. The Home Heating Oil Reserve has the capacity to store two million barrels of home heating oil, to prevent any supply problems that could affect home heating needs. This reserve is in place to hedge against any shortages that could happen in the supply chain because of severe weather occurrences. Two million barrels of heating oil in the Northern Home Heating Oil Reserve would supplement the heating oil supplies for approximately ten days, which is determined to be enough time needed for ships and boats to bring more heating oil in from the Gulf of Mexico all the way to the harbor in New York.
The home heating oil reserve was initially filled by trading barrels of petroleum oil from the strategic petroleum reserves for barrels of heating oil. This was necessary because at first there was no authorization for funds to purchase the heating oil, so trading oil from the petroleum reserve was the only option available. At the end of the year 2000, Congress made an amendment to the Energy Policy and Conservation Act of 2000 to provide a clear authority where the home heating oil reserve was concerned. President George W. Bush made the reserve permanent and separated it from the strategic petroleum reserve, ensuring that this critical heating oil safety net for America is not dismantled. The home heating oil reserve is a way to guarantee that supplies of heating oil are sufficient even if the winter weather becomes much colder than normal, and that the supply of this oil is not disrupted.
There are guidelines in place to determine when heating oil from the Northern Home Heating Oil Reserve is to be released. In an emergency, or at any time that the barrels of heating oil are removed from the reserve and sold, there are regulations in place to ensure fair competition between companies. An open bidding system is in place that is online and is anonymous during the entire process, until the final bid is accepted. This ensures that no single companies or group of companies receives any special treatment at all in the sale process of this home heating oil. This system has been used just once since the northern home heating oil reserve was established, and that was in 2007. Thirty five thousand barrels of home heating oil were released from the reserve and sold to cover the higher cost of storage contracts for the oil storage, which came due in 2007 and had a significantly increased cost because of storage shortages.
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