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Bush Says He's Ready to Tap Reserves; Oil Prices Rise Slightly on Concerns of Shortages

Posted on: Wednesday, 23 November 2005, 09:00 CST

By ASSOCIATED PRESS

President Bush said today that the government is prepared to again tap into the Strategic Petroleum Reserve to alleviate any new pain at the pump caused by Hurricane Rita's assault on the center of the nation's energy industry.

With early indicators offering reason for optimism and a speedy recovery, Bush nonetheless warned Americans to expect some effect on energy supplies.

"A lot of our production comes from the Gulf and when you have a Hurricane Katrina followed by a Hurricane Rita, it's natural, unfortunately, that it's going to affect supplies," Bush said after a briefing at the Energy Department.

"It's important for our people to know that we understand the situation and we're willing to use the Strategic Petroleum Reserve to mitigate any shortfall in crude oil that could affect our consumers."

Bush also expressed concern that the storm could cause disruptions in getting gasoline to market. As a result, he urged people in the area to curtail any nonessential travel and asked federal employees to carpool as much as possible.

"The storms have shown how fragile the balance is between supply and demand in America," he said.

Crude oil prices moved 16 cents higher today to $64.35 a barrel in jittery trading as the oil industry assessed the damage caused by Hurricane Rita over the weekend.

In Texas, 16 oil refineries remained shut after the storm, and crews found significant damage to at least one in the Port Arthur area, said Energy Department spokesman Craig Stevens.

Analysts warned these outages could lead to petroleum product shortages - and higher prices - with the Northern Hemisphere winter fast approaching.

"I think the market is taking this too calmly and we could see prices bouncing back any time," said Deborah White, an energy analyst with SG Securities in Paris.

"There is an assessment in the market that we have arrived to a very strong turning point and demand will fall sharply," she added.

Heating oil rose 5 cents to $1.9950 a gallon today, while gasoline futures slipped 5 cents to $2.04 a gallon.

Job losses related to the oil production slowdown are also a concern.

"There is of course the direct impact of the shutting down a part of the economy, the loss of several hundred thousand jobs and reduced energy production in the Gulf," warned Ben Bernanke, chairman of the White House Council of Economic Advisers, in a speech Sunday.

Seven facilities in Port Arthur and Beaumont, Texas, and Lake Charles, Louisiana, were without power from Hurricane Rita, which left the 255,000-barrel-per-day Valero Energy Corp. plant in Port Arthur the most heavily damaged. and faces at least two weeks of repairs.

The International Energy Agency, the watchdog for industrialized, oil-importing countries, said it could release state-held stockpiles within the week to cushion any lost output from Rita.

IEA Executive Director Claude Mandil said today the agency would decide on whether a further release of state-controlled stockpiles of crude and gasoline is warranted within a week or so based on Rita's impact.

"Rita was better than expected, but no survey has been made on the platforms," said Mandil.

The U.S. Minerals Management Service said Sunday that 666 platforms in the Gulf remained unstaffed, up slightly from Saturday. Oil production in the Gulf of Mexico was totally shut down, and more than 80 percent of natural gas output was off. Since Katrina hit a month ago, more than 33 million barrels of oil and 156 billion cubic feet of natural gas have not been extracted.

The acting secretary-general of the Organization of Petroleum Exporting Countries warned Saturday that volatility is likely to remain a feature of the oil market unless more refineries are built.

"It is clear that the present tightness in the downstream sector, especially the lack of adequate refining capacity, will continue to put pressure on prices," Adnan Shihab-Eldin was quoted as saying by Dow Jones Newswires.

Source: Buffalo News

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