US Releases Emergency Oil Stocks After Huge Hurricane
Washington (AFP) Aug 31, 2005
The United States prepared Wednesday to open its emergency oil reserves for the first time in a year to replenish Gulf Coast refinery operations devastated by Hurricane Katrina.
As gasoline prices surged across the nation, US President George W. Bush said he had directed Energy Secretary Samuel Bodman to pump supplies from the Strategic Petroleum Reserve to hard-pressed refiners.
"A lot of crude production has been shut down because of this storm," Bush told reporters in the White House Rose Garden after cutting short his Texas holiday to oversee relief efforts.
"I instructed Secretary Bodman to work with refiners, people who need crude oil to alleviate any shortage through loans," he said.
"Our citizens must understand, the storm has disrupted the capacity to make gasoline and distribute gasoline."
Industry analysts expected the oil to be shipped to refineries further west in Texas, which escaped unscathed from Katrina but are now running low on crude supplies because of production interruptions in the Gulf of Mexico region.
The United States keeps 700 million barrels of oil stored in four underground salt caverns on the Texas and Louisiana coasts to cushion oil markets during supply disruptions.
The reserve, which was created during the 1970s oil shocks, was last used after Hurricane Ivan in September 2004, when five million barrels of crude oil were released.
At least eight refineries have been shut down on the coasts of Louisiana and Mississippi since Katrina roared ashore early Monday just east of New Orleans.
Many other refineries are struggling to cope with shortfalls of crude caused by the closure of pipelines from rigs in the Gulf of Mexico, where oil production has ground to a virtual halt, and of major ports.
Two of the Louisiana tanker terminals hit by the hurricane -- Port Fourchon and the Louisiana Offshore Oil Port -- combined handle more than 20 percent of all the crude oil imported into the United States.
While additional supplies of oil will be helpful in keeping crude prices from reaching 80 dollars a barrel, the real supply constraints are with refined products made from crude, said Wachovia economist Jason Schenker.
"There is no strategic government reserve of natural gas or refined products, and right now the biggest concerns in the marketplace are for products," Schenker said.
"At the end of the day, it may not matter for gasoline and heating oil prices how much crude comes out of the SPR," he said.
Oil prices have soared to new record highs above 70 dollars a barrel in the hurricane's wake.
The decision to open the US petroleum reserve calmed prices Wednesday, but analysts said the government's move would make little difference and prices could easily rebound.
"It is unknown how extensive the damage to the refineries is," said Tony Nunan, manager for energy risk management with Mitsubishi Corp's international petroleum business in Tokyo.
"If you don't have enough refining capacity, it doesn't help you with the crude oil," he said.
But Ben Bernanke, chairman of the Council of Economic Advisers in the White House, said opening the reserves would help companies "produce more gasoline and help alleviate some of the shortages".
Speaking on the CNBC network, he acknowledged that times were "tough" for US consumers and businesses as petrol pump prices shoot up even more as a result of Katrina.
"My guess is though that as long as we find that the energy impact is only temporary, and there is no permanent damage to the infrastructure ... the effects in the overall economy will be fairly modest," he said.
Philadelphia Federal Reserve president Anthony Santomero said the effects of Katrina were likely to impede but not halt the economy.
"The US economy has proven to be surprisingly capable of absorbing such shocks, and after a short period, the effects of Katrina are likely to slow but not stall the forward progress of the national economy," he said.
Several economists, however, fretted that Katrina could hurt growth in the third quarter to September.
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Commentary: Energy Emergency
Washington (UPI) Aug 31, 2005
Fear spurred by the Soviet Union's alarming strides in the conquest of space - Sputnik in October 1957, Laika the female dog in orbit a month later, then the first orbit around the moon, followed by Yuri Gagarin, the first human in space in April 1961 - prompted then Sen. Lyndon Johnson to declare: "Control of space means control of the world." Hand-wringing by nervous nellies in the West gradually gave communism the edge as the wave of the future over laissez-faire capitalism.
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