- The Washington Times - Friday, September 2, 2005

The United States and European nations yesterday announced they are releasing a combined 2 million barrels of oil and gasoline a day from their emergency reserves to more than plug the gap of losses from the Gulf of Mexico.

Oil and wholesale gasoline prices dropped dramatically with the move, which is aimed at alleviating the biggest threat to the U.S. economy from Hurricane Katrina’s destruction of an area providing one-third of U.S. energy supplies.

Also helping to lower prices was the return to service yesterday of the largest U.S. oil import terminal, located in the Gulf, a critical pipeline supplying gasoline and jet fuel to the East Coast, and the recovery of some oil production in storm-stricken areas.

But because of the widespread devastation and still-unknown losses of Gulf production facilities, the White House warned that consumers will continue to experience occasional gas shortages in the weeks ahead, and should expect pump prices over $3 a gallon for six to eight weeks.

“The major concern that we’ve had is to avoid disruptions in the flow of fuel throughout our economy,” Energy Secretary Samuel W. Bodman said in announcing the release starting next week of 60 million barrels from 1.4 billion in international reserves over the next month.

Half of the oil will come from the U.S. Strategic Petroleum Reserve. It is only the second time the international reserves have been tapped for such an emergency. The first was a 1991 release during the Persian Gulf War.

European nations said they were joining in to show concern for hard-pressed U.S. motorists and refugees from the storm, and to bolster the global economy.

“We have all been saddened by the tragedy still unfolding in the United States,” said British Energy Minister Malcolm Wicks. “This is a global oil market and so a multilateral response is the right way forward.”

France said it is contributing two days’ worth of domestic fuel as “part of this solidarity effort toward the American people severely affected by this meteorological cataclysm.” Spain is also a major contributor.

Anticipating the flow of new fuel on the market, premium crude prices fell nearly $2 to $67.57 a barrel on the New York Mercantile Exchange — close to the levels that prevailed before the storm.

Wholesale gasoline for delivery in October plummeted 22.53 cents to $2.18 a gallon, laying the groundwork for some relief at the pump in the next few days.

Meanwhile, the Louisiana Offshore Oil Port, which before the storm offloaded 1 million barrels of imported oil each day, announced it is back in operation. The recovery of some production from Gulf oil wells also reduced the daily shortfall in U.S. output to 1.33 million barrels.

The White House said it anticipates that about half of the U.S. refining capacity lost to the storm will be restored within two weeks.

Enticed by high U.S. prices and the temporary suspension of strict U.S. summer pollution controls earlier this week, European and Middle Eastern refineries already have dispatched 20 tankers loaded with 10 million barrels of fuel to East Coast ports, Mr. Bodman said.

The U.S. already has loaned a total of 9.1 million barrels of oil from its reserves in separate responses to requests from oil refineries earlier this week.

To ease the costs borne by truckers, farmers and other businesses threatened with paralyzing fuel shortages and price spikes, the administration yesterday lifted the federal excise tax on diesel fuels and temporarily waived requirements for drivers participating in rescue efforts.

Georgia suspended motor fuel taxes for a month, and Massachusetts, Connecticut and Pennsylvania are considering similar measures. No suspension in the federal gasoline tax is under consideration.

On Thursday, the administration lifted other restrictions on shipping companies to facilitate deliveries of fuel as necessary between U.S. ports.

Analysts said the relaxed gasoline standards announced by the Environmental Protection Agency Tuesday, effectively ending summer anti-pollution requirements two weeks ahead of time, in particular are helping to facilitate shipments of gasoline from Europe and ease market fears of shortages.

“It’s making a greater volume available,” said Kyle Cooper, an analyst with Citigroup. “Both chemically and physically it is easier to make winter-grade gasoline.”

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