U.S. oil reserves released; price, shortage fears rise
WASHINGTON — The Bush administration moved yesterday to release at least 1 million barrels of oil from the nation's strategic reserve, an announcement that blunted the rise in oil prices in the wake of Hurricane Katrina but did little to slow surging gasoline prices.
Federal authorities and energy companies rushed emergency electricity generators to the Gulf Coast to resume pumping gasoline through the two main arteries that feed the Eastern Seaboard. And the nation's largest oil-import terminal, the Louisiana Offshore Oil Port, announced it was able to begin pumping oil from foreign supertankers last night, the first glimmer of good news from the Gulf of Mexico.
But analysts warned that a rush of demand from consumers hoping to fill their gas tanks would be enough to trigger shortages in coming days and drive prices sharply higher.
"I wouldn't rule out $4 a gallon," said Marshall Steeves, an energy analyst with Refco Group. "There is a definite possibility of sporadic and regional shortages."
Several Southeastern cities that rely on deliveries of fuel from the Gulf of Mexico couldn't meet customer demand yesterday as drivers raced to tank up.
At the Murphy USA gas station in St. Cloud, Fla., near Disney World, 30 or more cars were backed up waiting to fill up. The station blocked its entrances with cones.
"We're running out of gas," employee Alicia Luke said. She said the station, which usually receives gas every other day, was told that it would be five days before it got more.
In Atlanta and in Charlotte, N.C., many stations were experiencing delays in receiving supplies and couldn't serve their fearful customers. One British Petroleum station in Stockbridge, Ga., yesterday was selling regular for $5.87 a gallon and premium for $6.07.
The announced release from the 700 million-barrel Strategic Petroleum Reserve calmed speculators, who had been bidding up the price of oil beyond the level warranted by the crisis, analysts said.
Light sweet crude on the New York Mercantile Exchange fell 87 cents, to $68.94 a barrel, down from an overnight high of $70.65. That fall also was aided by the prospects of renewed shipments of crude imports from the offshore oil port to onshore refineries.
But those developments had no impact on gasoline futures, which surged 14 cents to $2.6145 a gallon on the Nymex. That is 35 percent higher than they were Friday. The average national price of a gallon of regular gasoline rose 1.5 cents to a record $2.619, according to the AAA automotive club. But that price, when adjusted for inflation, is still below the high set in the early 1980s.
Gas sold at Seattle-area pumps comes from local refineries, but local drivers still can expect a surge in prices, AAA spokeswoman Jennifer Harbison said.
"It shouldn't be as drastic as in those local areas, but we will see effects," she said.
Western Washington refineries already are operating "at capacity," said Frank Holmes, Northwest region manager for the trade group Western State's Petroleum Association. Harbison said some local refineries likely would sell to other regions of the country. Holmes wouldn't comment on that.
Seattle-area prices have averaged about $2.75 this week, but Harbison said the club has heard reports that prices were 5 to 15 cents more than that yesterday.
No matter how much crude oil can be brought on shore, the real problem lies with refining it into gasoline and shipping it to filling stations, said Fadel Gheit, an oil and gas analyst at Oppenheimer.
The two main gasoline pipelines from the Gulf to the East Coast — Plantation, which terminates near Reagan National Airport in Washington, D.C., and Colonial, which ends in New Jersey — remain idle as they await electricity to run their pumps. Eight major refineries still are shut down, squeezing U.S. refining capacity by 10 percent.
Those outages have cut production of refined gas by 1 million barrels a day, Gheit said, "by far the largest drop of gasoline that I know in memory."
Supplies of refined gasoline already were tight before Katrina, as demand from China and other parts of the world squeezed capacity.
The pledged release from the reserve came during a bipartisan clamor for action. Some Democrats, such as Rep. Edward Markey, D-Mass., have been haranguing Bush for months for such a release from the reserve, and they were joined this week by a handful of Republicans. But the White House has been reluctant to interfere with the free market.
That reluctance will dampen the impact of the intervention, said Amy Jaffe, an energy research specialist at Rice University's James A. Baker III Institute for Public Policy.
Oil traders in the 1990s knew the Clinton White House would intervene to hold down oil prices, so they would begin selling oil during price spikes. Bush's disinclination has emboldened speculators to bid up oil prices, she said, and they are not likely to sell now because they do not believe the White House will make sure prices fall sharply. "With Bush, speculators don't see a limit," she said.
Compiled from The Washington Post, Knight Ridder Newspapers, the Chicago Tribune and Seattle Times staff reporter Emily Heffter.
Copyright © 2005 The Seattle Times Company