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  • US to Begin Using Oil Reserves

    White House to tap reserves
    Energy Secretary Samuel Bodman says U.S. will lend oil to refiners hurt by Hurricane Katrina.
    August 31, 2005: 12:23 PM EDT
    By David Ellis, CNN/Money staff writer
    NEW YORK (CNN/Money) - Energy Secretary Samuel Bodman said Wednesday that the White House plans on tapping the nation's Strategic Petroleum Reserve to help refiners hurt by Hurricane Katrina.

    Bodman said in interviews televised on CNN and other networks that officials have not determined the amount of crude oil that will be drawn from the reserve, but that it would be a loan to refiners.

    "The SPR was put in place specifically for this kind of an event," Bodman said in one interview. "We now have, in some instances, problems with getting crude to some refineries."

    Bodman said that crude oil from the reserve should be available to refiners as early as Thursday.

    Several analysts contend there is already an adequate supply of crude oil, but that the lack of electricity in the region will create a bottleneck at refineries processing oil from the Strategic Petroleum Reserves.

    U.S. crude oil prices fell 46 cents to $69.35 in electronic trading following Bodman's comments. Crude prices had risen above $70 a barrel Tuesday before settling up $2.61 at $69.81 a barrel in New York.

    The reserve, the government's emergency stockpile of crude oil, was created in the aftermath of the 1973-74 oil embargo and is overseen by the Energy Department. Oil in the reserves are estimated at more than 700 million barrels, stored in underground caverns in Louisiana and Texas, according to Reuters.

    After Hurricane Ivan struck last September, the U.S. government loaned more than 5 million barrels of crude oil from the reserve.

    Evan Smith, an analyst for US Global Investors, said the decision by the White House will probably ease demand in the market for crude in the short run, but noted that bigger problems loom on the horizon.

    "You might have more oil out there and it will probably depress crude prices but it won't do anything for gasoline, diesel or heating oil," said Smith.

    Hurricane Katrina slammed into Louisiana and Mississippi on Monday, halting crude oil production in the Gulf of Mexico and damaging deep-water oil facilities.

    Some 95 percent of the Gulf of Mexico's oil output and more than 88 percent of natural gas production were shut as of Tuesday, the U.S. Minerals Management Service said.

    The region produces more than 1.4 million barrels a day of oil for U.S. consumption, equal to about 7 percent of the country's demand.

    Nine refineries were also closed along the Gulf Coast due to the storm, and four others scaled back operations, Reuters reported Tuesday. The affected refineries make up 10 percent of the U.S. refining capacity.

    Many oil companies, such as Royal Dutch Shell, reported damage following initial inspections of some deep-water platforms. Drilling companies Ensco, Transocean and Noble all reported rigs adrift after the storm, the news agency said.

    Daniel Lippe, president of Houston-based Petral Worldwide, said the scope of damage that Hurricane Katrina caused to platforms and rigs will play a role in determining crude prices.

    "It really depends on how much damage is done to production platforms in the Gulf of Mexico," he said. "By Tuesday or Wednesday I suspect we'll know a whole lot more about damage in the offshore production area,"

    Pipelines in the region have also been unable to pump gasoline to other areas of the country since Hurricane Katrina hit the Gulf Coast on Monday, cutting power to the conduits.

    An official announcement on the reserve release is expected later this afternoon, Bodman said.

    http://money.cnn.com/2005/08/31/news...ex.htm?cnn=yes

  • #2
    That's the reason why this reserve was set up, says the government - but it's obviously a strategic stockpile used to power the country in case the middle east decides on another embargo against the USA. It can buy us enough time to:

    1. Find new countries to buy oil from (nowadays, russia)
    2. End the embargo through diplomatic means
    3. End the embargo through warfare

    I found one error in the post though, so correct me if i'm wrong

    You might have more oil out there and it will probably depress crude prices but it won't do anything for gasoline, diesel or heating oil,"
    I'm assuming he is referring to prices only, but crude oil - when refined - can be used as gasoline and heating oil. Crude oil is the purest form. It's what you do with it that turns it into proper gases for cars or homes. I dont think releasing crude oil will lower prices but I think it will prevent a large and speedy increase.
    Warpox exposes himself | Editorial 1 4 | 2Pox

    Comment


    • #3
      This is kind of related, pricing experts expecting $4 gas coming soon:

      http://money.cnn.com/2005/08/31/news...ex.htm?cnn=yes

      Consumers can expect retail gas prices to rise to $4 a gallon soon but whether they stay there depends on the long-term damage to oil facilities from Hurricane Katrina, oil and gas analysts said Wednesday.

      "There's no question gas will hit $4 a gallon," Ben Brockwell, director of pricing at the Oil Price Information Service, said. "The question is how high will it go and how long will it last?"

      OPIS tracks wholesale and retail oil prices and provides pricing information for AAA's daily reports on fuel prices.

      Brockwell said with gasoline prices now exceeding $3 a gallon before even reaching the wholesale level, it "doesn't take a genius" to expect retail prices to hit $4 a gallon soon.

      "Consumers haven't seen the worst of it yet," Brockwell said.

      He expects consumers in the Southeast and Northeast to be pinched first, following the impact of Hurricane Katrina on the Gulf Coast region.
      Katrina pressures gas supplies

      Katrina forced operators to close more than a tenth of the country's refining capacity and a quarter of its oil production, which sent gasoline prices surging.

      Two major pipelines that supply gasoline to key terminals and distribution centers along the Eastern U.S. were shut down due to power outages caused by the storm. (Video of Energy Secretary Samuel Bodman discussing U.S. plans to tap strategic oil reserve to help refiners -- 4:16. Click here to watch).

      Colonial Pipeline said it hopes to be back in partial operation soon, while the date of Plantation Pipeline's restart is not clear. Each day the pipelines are closed, supplies get backlogged and distribution centers must rely on reserves.

      "With this kind of hiccup in refinery capacity, in stretched markets like California, you could see over $4 a gallon in gas," Evan Smith, an analyst at U.S. Global Investors, told CNN/Money.

      While it's still too early to fully assess the damage caused by Katrina, efforts to build up inventories of crude oil, natural gas and other products like gasoline will be set back by the storm, according to Nariman Behravesh, chief economist at Global Insight.

      In a research note, Behravesh laid out a worst-case scenario that puts average prices for regular unleaded gasoline at about $3.50 a gallon for the next four to six months.

      "The impact on consumer spending in such a scenario would be very dramatic, cutting the growth rate by as much as 3 percent and pushing real GDP growth in the fourth quarter closer to zero," he wrote.

      In a best-case scenario, he forecast retail pump prices to peak at $3 a gallon for a couple of months, but then fall back to around $2.50 by year-end.

      The nationwide average price for a gallon of regular unleaded hit a fresh high of $2.619 Wednesday, according to AAA, the largest U.S. motorist organization, formerly known as the American Automobile Association.

      Average gasoline prices have gained 40 percent in the last year.

      Prices for crude oil are also up sharply and are currently hovering near record highs just under $70 a barrel.
      Be Humble or Get Humbled

      Comment


      • #4
        Gasoline will not hit $4 a gallon. That economist who suggested gasoline will hit $4 is consistently wrong. I read that article, and have seen similiar 'doomsday' quotes from the person quoted in the past.

        The only way gasoline will hit $4 a gallon is if something bigger then a month's "dent" in oil drilling and refining in the gulf coast occurred. Now that President Bush is releasing some oil form the reserves, the price of oil has already retreated and/or leveled out from pre-katrina days.
        Warpox exposes himself | Editorial 1 4 | 2Pox

        Comment


        • #5
          The Saudi's have said they will step up production. We have authorized drilling in ANWR. The Latin American countrys need to do more to step up production, but I do see oil prices going down after September.

          Comment


          • #6
            who's authorized ANWR?
            the last vet.before everyone got vetted
            Originally posted by MarshallArts
            Who's got you quoted in their sigs? Are they as equally worthy as those that have sigged me? I just can't imagine it.

            Comment


            • #7
              Originally posted by TheWalrus
              Gasoline will not hit $4 a gallon. That economist who suggested gasoline will hit $4 is consistently wrong. I read that article, and have seen similiar 'doomsday' quotes from the person quoted in the past.

              The only way gasoline will hit $4 a gallon is if something bigger then a month's "dent" in oil drilling and refining in the gulf coast occurred. Now that President Bush is releasing some oil form the reserves, the price of oil has already retreated and/or leveled out from pre-katrina days.
              Gas is already around $3.50 or even $5 in Atlanta and there are shortages there too...so I guess you're wrong?

              Here's proof:

              Gas prices surge above $3
              Drivers flock to the pumps as outages, bottlenecks fan fears of a gas shortage.
              September 1, 2005: 10:45 AM EDT

              NEW YORK (CNN/Money) - Gasoline prices spiked as high as $5 a gallon in some areas Thursday as consumers fearing a gas shortage raced to the pumps.

              Drivers in Atlanta said stations were charging well over $3 a gallon for regular unleaded, and at least one station in Stockbridge, Ga., was charging customers $5.87 a gallon.

              The price hikes were felt nationwide, with gasoline surging to $3.59 in Boston, $3.58 in Milwaukee and well above $3 in parts of New York.

              Nationwide, the national self-serve unleaded average was $2.68 a gallon, AAA said on its Web site, increase of 6.1 cents -- and a record high.

              The runup in prices prompted President Bush to warn against gouging and to encourage Americans to conserve. (For more on the president's comments, click here).

              Consumers have been making a run on the pumps in the wake of Hurricane Katrina as refinery shutdowns and power outages fan worries of a looming gas crisis.

              "We know there will be some spot shortages (but) there's gasoline in most areas to meet most people's needs," Gregg Laskoski, managing director of AAA in the South, told CNN.

              Hurricane Katrina forced several refinery operators in the Gulf Coast, where about 40 percent of the nation's refining capacity is located, to shutdown.

              Pressuring gas supplies even more were power outages that shut down two major pipelines that pump gas to key terminals and distribution centers along the Eastern U.S.

              Colonial Pipeline reported Wednesday evening that it restored its pipeline to between 25 and 35 percent of capacity while Plantation Pipeline said its operations were back to 25 percent of normal. But with both pipelines operating below full capacity, the entire distribution process gets backed up.

              To meet the onslaught of demand, stations have raised prices overnight. Some experts are saying gas could $4 a gallon, though whether those prices will be sustained remains to be seen. (For more, click here).

              AAA's Laskoski urged people not to fill up their tanks if they're not traveling and said people should conserve fuel by keeping their cars properly maintained and tires properly inflated.

              Average nationwide gasoline prices have gained more than 40 percent in the last year, and crude prices are hovering near $70 a barrel

              http://money.cnn.com/2005/09/01/mark...ices/index.htm
              Last edited by Angelus911; 09-01-2005, 10:28 AM.
              Be Humble or Get Humbled

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