- The Washington Times - Wednesday, August 31, 2005

The United States yesterday tapped into its emergency oil reserves and eased some fuel-emissions standards to try to avert a predicted spike in gasoline prices nationwide of 60 cents or more in the next few days.

The moves helped tame the price of oil, which declined for the first time in New York trading since Hurricane Katrina struck the Gulf Coast’s vital oil fields on Monday. But the actions did little to prevent gas prices from soaring as high as $3.50 a gallon for premium blends at some stations in the Washington area yesterday.

The pollution waivers will allow higher evaporation rates for gas to free up fuel already in storage at local stations and depots that normally would have been sold after the summer season is over on Sept. 15. The policy also will temporarily allow the sale and import of high-sulfur diesel fuels.

The devastation wreaked on the Gulf’s oil production and import facilities, combined with the idling of at least eight major refineries and two major pipelines by power outages, already has caused fuel shortages and rationing of fuel supplies by gasoline dealers.

“These waivers are necessary to see that fuel is available throughout the country,” said Stephen Johnson, head of the Environmental Protection Agency. “It is clear the consequences of the hurricane have become more widespread.”

The first release of crude oil from the Strategic Petroleum Reserve to a Louisiana refinery yesterday helped calm the price of premium crude in New York, which declined 87 cents to $68.94 a barrel after surging over $70 earlier this week.

But the emerging shortages of refined gasoline sent wholesale gas prices soaring 6 percent to $2.65 a gallon — near what as recently as Monday was the average price at the pump.

Energy analysts say retail prices normally average about 62 cents over the wholesale cost, setting the stage for a major spike in street prices in the next few days.

“At the end of the day, it may not matter for gasoline or heating oil how much crude comes out” of the reserves, said Jason Shenker, analyst with Wachovia Securities. “After all, it will not matter how much crude is available if the refineries are shut down and can’t run the crude they have.”

The damage to Gulf facilities in the storm, which tore through the heart of the Gulf oil fields at maximum strength before weakening over land, appears to be unprecedented in scope and could take months or even years to reverse, analysts said.

The Coast Guard reported that at least 20 oil rigs and platforms are missing in the Gulf of Mexico, and a ruptured gas pipeline is on fire. Transocean Inc. said its Deepwater Nautilus rig has significant damage and has drifted 80 miles from where it was before the storm.

Kinder Morgan Energy Partners said its pipeline delivering gasoline, diesel and jet fuel from Louisiana to Washington remained shut because of a power outage at a pumping station in Mississippi. The company said it is trying to obtain generators to restore minimal service on the line.

Supplies to the Midwest, Northeast and other areas are similarly threatened or delayed by power outages, despite the return of a smattering of undamaged Gulf oil facilities to production yesterday.

The shock of a 60-cent overnight jump in gas prices, coming on top of the doubling of prices seen in the past two years, could have a profound effect on consumers and the U.S. economy, particularly if prices remain over $3 a gallon for some time, economists said.

Similar spikes in energy prices helped induce recessions during the 1970s and 1980s. But many economists remain hopeful that the dampening effect from the hurricane will be only temporary.

“The expansion is strong enough to withstand” the hurricane and high oil prices, though it may slow “for a time,” said Anthony Santomero, president of the Federal Reserve Bank of Philadelphia.

The economy has become “more fuel-efficient” since the 1970s and consumers are being buoyed by a pickup of growth in jobs and incomes despite the high oil prices, he said.

But he added that the central bank is still sorting through the economic aftermath of the storm. “We don’t know to what extent this is a serious disruption or a relatively short-term one,” he said.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide