Trump Taps Heating Oil and Crude Reserves, Invokes Defense Production Act as Iran Tensions Lift Oil

The Trump administration rolled out three emergency fuel measures in three days as Iran tensions pushed crude higher. On Wednesday, Oct. 21, the Energy Department said it would make up to one-third of the Northeast Home Heating Oil Reserve, up to 315,000 barrels of ultra-low sulfur distillate, available through an exchange that borrowers must repay with a premium. Heating oil costs in the region are up about 70% from a year ago, according to Fox Business.

On Thursday, Trump signed a presidential memo invoking the Defense Production Act, declaring petroleum production, refining and related activities essential to national defense and allowing the administration to offer financial incentives for drilling, pipelines and liquid fuel storage. The memo named no projects or dollar amounts. On Friday the Energy Department authorized an emergency exchange of up to 400,000 barrels of crude from the Strategic Petroleum Reserve to offset disrupted crude deliveries to PSX's Lake Charles, Louisiana refinery.

The measures landed as Trump ruled out negotiations with Iran, which rattled stocks as oil climbed. Brent crude rose about 4% on Thursday to settle at $113.17 a barrel, its highest close since early May, CNBC reported. For markets, the actions matter less for their size, which is small next to national demand, than as a signal that the administration expects elevated fuel prices to persist into winter.

What to watch: whether bids for the heating oil exchange, due Oct. 27, draw enough interest to dent Northeast prices before deliveries finish Nov. 13; which projects receive Defense Production Act support; and whether the reserve, already at its lowest level since 1982, is drawn on again if refinery disruptions spread.