Oil market eases as US, other countries release emergency oil
Regional-USA, Economics, 9/3/2005

The global oil market has calmed on reports that the United States and other countries are releasing oil and fuels from their emergency reserves, while energy companies affected by Hurricane Katrina slowly are resuming operations.

In addition to the horrific destruction it inflicted on cities and towns along the U.S. Gulf Coast, Katrina damaged a large number of refineries and other oil facilities in the area, which provide a considerable part of U.S. domestic oil supplies.

Energy Secretary Samuel Bodman told reporters September 2 that the International Energy Agency (IEA) has decided to release 60 million barrels of oil and gasoline from emergency stocks of its member countries over the next 30 days.

A memorandum directing the release and the continued waiving of certain regulatory restrictions on the transport of petroleum was sent to the secretaries of Energy and Homeland Security by the White House on September 2.

Bodman said the planned release will "supplement the market forces already in place."

All 26 IEA member countries, including the United States, will take collective action to restore confidence to the oil market, according to a September 2 IEA news release. The release also said that major producers including those from the Organization of Petroleum Exporting Countries (OPEC) have committed to provide additional oil supplies on the world market.

"Although the initial impact of the storm was regional, the implications for the oil market are global," the IEA said.

The United States is a member of the group coordinating energy policies of member countries, and part of the IEA release -- 30 million barrels of oil -- will come from the U.S. Strategic Petroleum Reserve (SPR).

The Energy Department already has lent 8.5 million barrels of oil from the SPR to three refinery operators, and announced September 1 that it is considering other requests for emergency releases.

This action will "help minimize any potential supply disruptions as a result of the hurricane," Bodman said in the release.

Although the Bush administration has not appealed for international help, some countries are contemplating ways to help the United States deal with Katrina's aftermath. The European Union (EU) said it is ready to help the United States deal with the effects of the disaster, possibly by tapping European fuel reserves.

EU emergency stocks contain 169 million barrels of gasoline; U.S. official reserves hold 700 million barrels of oil.

Canadian oil companies said they are considering postponing fall maintenance at their refineries to help ease U.S. gasoline shortages, according to news reports. Canada is one of the major U.S. oil suppliers.

As the U.S. and other governments worked to calm global energy markets, companies in Louisiana and other states affected by the hurricane worked to resume operations.

In the state of Louisiana, the largest U.S. oil terminal on September 1 began to unload the first tanker since the shutdown caused by the hurricane, according to news reports.

And a major pipeline transporting fuels from the Gulf Coast to other parts of the United States has restarted operations, although not yet at full capacity, according to U.S. officials.

In addition, some oil-refinery operators said that repairs under way at three facilities in Louisiana should allow them to resume, at least partially, their operations -- in one case within a day and in another within a week. Other refineries in Gulf Coast states remain closed, however, and it is difficult to predict when all or most of them will be fully operational, according to industry experts.

U.S. refining capacity had been strained even before the storm. The hurricane shut down about 10 percent of that capacity, according to news reports.

Meanwhile, the U.S. Environmental Protection Agency temporarily relaxed anti-pollution fuel standards to help refineries bring more gasoline and diesel fuel on the market from stocks normally used in winter and from oil imports. The administration also waived a shipping law to allow foreign tankers to transport oil and fuels between domestic ports, as well as rules concerning repair crews and truck drivers transporting gasoline, diesel and jet fuel to allow them to work longer hours.

Crude oil prices on the New York Mercantile Exchange were at $67.50 by early afternoon September 2, down 2.84 percent from $69.47 per barrel at the close of trading on September 1.

Gasoline prices at the same exchange fell 6.7 percent to $2.2475 a gallon on the same day. But gasoline prices in the United States -- which surged the week of August 28 on concerns that fuel supplies would be disrupted for a longer time -- have kept rising, according to news reports.

President Bush said that recovery will be a "long process" and urged Americans to conserve gasoline in the coming weeks.

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