clarinews@clarinet.com (WALTER ANDREWS, UPI Business Writer) (02/02/90)
NEW YORK (UPI) -- The difference between the price refineries paid for crude oil and the amount they charged for heating oil made from crude, soared fourfold during the recent December freeze, the government reported Thursday. But the Energy Information Administration in its report to Congress said, ``It's too early to translate these (margins) into profits.'' In its report to the Senate Governmental Affairs Committee and the House Subcommittee on Energy and Power, the EIA said refinery margins in New England jumped from 15.8 cents a gallon Dec. 4, to 59 cents a gallon Jan. 2. In the mid-Atlantic states, they soared from 14.2 cents Dec. 4 to Jan. 2's 53 cents a gallon, the Energy Department agency said. The Midwest increase was less -- 14.6 cents Dec. 4 to 36.4 cents a gallon Jan. 2. Most heating oil is consumed in the Northeast. The EIA report was made in response to congressional concerns and Northeast governors' questions of how much profits rose and who profitted from the near-record December cold snap and rise in consumer heating oil prices. ``Neither of these questions can be answered accurately without actual cost and profit data covering companies throughout the entire distribution chain. Such data are generally not readily available in a timely manner,'' the EIA said. It noted that margins do not account for refining, distribution, transportation, storage and other costs, nor reflect the actual volume of product sold. ``Because the use of margins is so misleading, EIA has been reluctant to provide them in this study,'' the agency said, in apparent protest to the insistence of the congressional committees. The data nevertheless indicated the margin between the price retailers charged homeowners and the wholesale price they paid remained relatively stable during December but rose during January as retail prices lagged the subsequent decline in wholesale prices. ``Data on margins indicate that the spread in heating oil was greatest at the wholesale level,'' the EIA report said. The report will be officially presented to a hearing Friday of the House subcommittee. Subcommittee staffer Tom Runge said, ``We've never had prices go way up and and come down like they did in the last month and a half in my experience.'' He conceded the profit picture may be more complicated than the margin portrayal. Refiners' profits could have been diluted by positions they took in the futures trading market as a hedge against large price swings, Runge said. But some oil companies also have separate organizations trading in futures contracts. These organizations could have benefited handsomely while the company's refinery operations would only show a modest profit on the balance sheet, he said. In late December, the Justice Department announced a ``preliminary inquiry'' into the heating oil price increases to determine if a full investigation was warranted. A department spokesman Thursday said the inquiry was still underway and no determination had yet been made on whether to launch a full investigation.