Released on November 29, 2006
(Next Release on December 6, 2006)

Hot Stove Season
While baseball fans in the Northeast may no longer gather around hot wood-burning stoves to warm their hands while debating the merits of trades and signings in anticipation of spring training, many are turning up the thermostat in their oil-heated homes as the temperatures dip during the nightly broadcast of SportsCenter.

The Northeast, which includes New England and the Central Atlantic regions, has traditionally been the main region using heating oil as a residential heating fuel. In 2004, 5.5 billion gallons of heating oil were sold to residential consumers in the Northeast; this comprises 82 percent of total residential heating fuel sales in the U.S. Not only do consumers in the Northeast use heating oil more than in any other region, 78 percent of all households that use heating oil as the primary heating fuel are located in the Northeast.

EIA uses the Petroleum Allocation for Defense District (PADD) boundaries as the basis for its regional petroleum supply reporting. Heating oil (high-sulfur distillate) inventories are reported for the entire East Coast (PADD I), as well as broken down into three sub-PADDs, PADD IA (New England), PADD IB (Central Atlantic), and PADD IC (Lower Atlantic). It is not unusual to see an imbalance between the relative inventories of heating oil stocks in New England and the Central Atlantic as compared to each area’s respective level of product demand. For example, in 2005, the Central Atlantic held about 69 percent of Northeast heating oil inventories even though it only accounted for 60 percent of Northeast sales (Prime Supplier sales data are used as a proxy for implied demand.)

This phenomenon is mostly a function of the hub of petroleum and shipping infrastructure located in the New York-New Jersey corridor, which is part of the Central Atlantic region. Most imports that come in from Europe to supplement heating oil supplies enter the U.S. on the East Coast, and New York Harbor is the major East Coast hub. Other waterborne shipments from the U.S. Gulf Coast, Venezuela, and the Virgin Islands also enter into New York Harbor. Additionally, there are several pipelines that run into the region, as well as the Pennsylvania, New Jersey and Delaware refineries. There is also a high concentration of storage available in the area due to the high volume of product moving through the region. Product will often be stored in the Central Atlantic region until temperatures drop in New England, increasing demand and pulling product northward. Recognition of these factors leads EIA analysts to evaluate Northeast (New England and Central Atlantic) inventories as an aggregate rather than their individual pieces.

The charts below illustrate the history of New England and Central Atlantic inventories compared to their 5-year average range. Although inventories in both regions are above the average range prior to the first cold snap, this winter’s weather remains a key uncertainty and will be a major determinant for how quickly heating oil stocks are drawn down this winter. Additionally, inventories for the closest substitute to heating oil, diesel fuel, are relatively tight, which could put upward price pressure on both diesel fuel and heating oil if cold weather increases distillate demand sufficiently.

Residential Heating Fuel Prices Maintain Stability
Residential heating oil prices increased for the period ending November 27, 2006. The average residential heating oil price rose by 0.4 cent last week to reach 237.8 cents per gallon, a decrease of 3.9 cents from this time last year. Wholesale heating oil prices increased by 1.1 cents to reach 173.2 cents per gallon, a marginal drop of 0.1 cent compared to the same period last year.

The average residential propane price increased by 0.4 cent to reach 194.9 cents per gallon. This was an increase of 1.1 cents compared to the 193.8 cents per gallon average for this same time last year. Wholesale propane prices decreased by 0.2 cent per gallon, from 102.6 to 102.4 cents per gallon. This was a decrease of 4.6 cents from the November 28, 2005 price of 107.0 cents per gallon.

Retail Prices Continue to Rise This Week
The U.S. average retail price for regular gasoline rose 0.7 cent to 224.6 cents per gallon as of November 27, 9.2 cents per gallon higher than at this time last year. East Coast prices rose 1.9 cents to 222.7 cents per gallon. In the Midwest, prices fell 0.3 cent to 220.6 cents per gallon. Gulf Coast prices were up 0.7 cent to 212.1 cents per gallon. Rocky Mountain prices fell 0.6 cent to 223.5 cents per gallon. The West Coast saw an increase of 0.2 cent to 247.5 cents per gallon, but California prices decreased slightly, by 0.2 cent, to 249.3 cents per gallon.

Retail diesel fuel prices continued to increase this week, with average nationwide prices rising 1.4 cents to 256.7 cents per gallon. Prices are now 8.8 cents more than at this time last year. Regionally, East Coast prices were up 1.6 cents to 253.7 cents per gallon. Midwest price remained the same, at 255.4 cents per gallon. The Gulf Coast saw the average price go up 2.1 cents to 249.0 cents per gallon. Rocky Mountain prices rose 3.3 cents to 268.0 cents per gallon. Prices on the West Coast increased 3.6 cents to 276.0 cents per gallon, while prices in California were up 2.0 cents to 271.0 cents per gallon. California prices are 15.1 cents per gallon higher than at this time last year.

Propane Inventories Move Sharply Lower
U.S. propane inventories fell last week by 1.2 million barrels, leaving the Nation’s primary supply of propane at an estimated 69.7 million barrels as of November 24, 2006. Inventory declines regionally posted sharp drops in the Gulf Coast and Midwest with respective 0.7-million-barrel and 0.4-million-barrel declines, reflecting the higher heating demand in the central portion of the Nation last week. However, moderate temperatures on the East Coast during this same period limited the draw on inventories in this region to a more modest 0.1 million barrels. The combined Rocky Mountain/West Coast regions also reported a slight decline last week. Propylene non-fuel use inventories fell by 0.1 million barrels last week to account for a 5.1 percent share of total propane/propylene inventories, the same as the prior week’s share.

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