Obama: Heating Assistance Cut Based on Lower Energy Prices; Claim Does Not Hold True for Heating Oil

Posted by Josh Garrett on February 16, 2011 at 4:37 pm

President Obama at his budget press conference on Tuesday. His claim of falling energy prices since he took office is dead wrong when applied to heating oil. (image: Doug Mills/The New York Times via nytimes.com)

President Obama defended his budget at a press conference on Tuesday, and offered a specific explanation for why it includes a 50 percent cut to the LIHEAP energy assistance program. Boston.com reported on Tuesday that Obama believed energy prices had come down since he took office (in January 2009), which justified reducing the Low Income Home Energy Assistance Program’s (LIHEAP) funding this year.

Here’s Obama’s full quote on the issue:

On the LIHEAP program, the home heating assistance program, we doubled the home heating assistance program when I first came into office in part because there was a huge energy spike, and so folks, if we just kept it at the same level, folks would have been in real trouble. Energy prices have now gone down but the cost of the program has stayed the same. So what we’ve said is let’s go back to a more sustainable level.

The president’s comment was his first on the specific question of the $2.5-billion-dollar cut to LIHEAP funding included in his proposed budget for fiscal year 2011. Since the cut was first reported last week, it has been sharply criticized by politicians and private citizens alike (a quick search on Twitter reveals strong opposition to LIHEAP cuts). Supporters of maintaining LIHEAP’s current funding of $5.1 billion rebutted Obama’s justification by saying that even though energy prices may have come down over the last two years, unemployment remains high and more Americans than ever currently rely on LIHEAP assistance to stay warm.

While President Obama’s logic applies to natural gas prices, which have been falling steadily for the last two years, it is far from true for heating oil. According to Energy Information Administration (EIA) data, the NYMEX price for 1 million BTUs of natural gas on the day of Obama’s inauguration (January 20, 2009) was $4.64 and the its closing price at the NYMEX today (February 16, 2011) was $3.98. That 66-cent decline represents a 14 percent decrease in natural gas prices over the last two years. This drop in prices for natural gas, by far the most widely used heating fuel in the US, was a significant relief for natural gas users. But following the president’s logic in the natural gas category, wouldn’t a 14 percent decrease in prices justify a 14 percent (or thereabouts) reduction in assistance funding, not a 50 percent cut?

As for heating oil, the president’s assessment is pretty far off. Crude and heating oil prices hit their highest levels ever in summer of 2008, only to crash along with the US economy in late 2008 and early 2009. By January 20, 2009, heating oil prices had fallen a great distance from their July 2008 peak and were quite affordable in the context of preceding heating seasons. The 2010-2011 heating season has unfortunately been a different story: a host of factors has driven up the price of heating oil sharply over the last 12 months, and heating oil users are feeling the pinch. According to data from the EIA, the NYMEX price for a gallon of heating oil on January 20, 2009 was $1.38. Today, heating oil closed at $2.77 per gallon at the NYMEX. That’s a $1.39 or 100 percent increase in just over two years. In the last year alone, the price of heating oil at the NYMEX has jumped 77 cents per gallon, from $2.00 on February 16, 2010.

The market price for heating oil has risen steeply over the past year. (image: ft.com)

Lower natural gas prices over the last two years may reasonably justify a reduction in LIHEAP funding, as President Obama claimed. However, the extreme opposite situation that heating oil users find themselves in would make a deep cut to LIHEAP funding utterly devastating to those who rely on the fuel to keep warm. The broad justification offered by the president for home energy assistance cuts simply couldn’t be less true when applied to heating oil users. Hopefully, the president will see the error in his judgment in this regard and eliminate or seriously scale back proposed cuts to LIHEAP aid funding, especially to heating oil-dependent Northeastern states.