Guardian Unlimited | Special reports | US to release oil from emergency reserves
Guardian Unlimited | Special reports | US to release oil from emergency reserves
Mark Tran
Wednesday August 31, 2005
An oil platform ripped from its mooring in the Gulf of Mexico rests by the shore of Dauphin Island, Alabama. Photograph: Peter Cosgrove/AP
The US today said it would release oil from its petroleum reserves to help refiners hit by Hurricane Katrina.
The move came as oil prices surged to more than $70 (£39.23) a barrel. It is designed to give refineries in the Gulf Coast area a temporary supply of crude oil to replace interrupted shipments from tankers or offshore oil platforms damaged by the hurricane.
America's emergency petroleum stockpile - almost 700m barrels of oil stored in underground salt caverns along the Texas and Louisiana Gulf Coast - is designed to cushion oil markets during emergencies.
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Katrina, one of the most powerful storms in US history, forced operators to close more than one tenth of the country's refining capacity and a quarter of its oil output.
The prices of petrol and heating oil rose sharply after the disaster, and may increase further if the storm - feared to have killed hundreds of people along the coast - has caused permanent damage.
As oil companies assessed the damage to rigs and refineries in the Gulf of Mexico, oil prices rose. US crude was up 64 cents at $70.45 in morning trading, while Brent crude rose 29 cents to $67.86 a barrel. Yesterday, US crude soared to a record $70.85 a barrel before closing lower.
More than 1.4m barrels a day of crude production capacity - around 7% of domestic US demand - remained shut down the day after Katrina tore through the region.
Royal Dutch Shell's huge Mars platform became the latest - and potentially largest - casualty when aerial photos showed significant damage to the top of the facility, which normally produces 220,000 barrels of crude and 220m cubic feet of natural gas a day.
At least six other drilling companies, including Ensco and Transocean, reported rigs adrift after the storm, raising the prospect that dragging anchors or moorings could damage vital undersea pipelines.
Flooding now poses a serious risk for refineries, nine of which were shut down and four more left running at reduced rates. It took six months to restore output after last September's weaker Hurricane Ivan, which followed a similar path.
With the peak of hurricane season looming next month, some analysts fear more storms could push crude prices towards $80 a barrel - comparable only to the inflation-adjusted $90 a barrel period after the Iranian revolution in 1980. Oil prices are now more than 60% higher than a year ago.
"High oil prices are a catastrophe for the people," said the German economy minister, Wolfgang Clement, adding that prices were so high "not because of demand, but because of speculation".
"Depending on what we learn in the next few days, this could be the biggest oil supply shock since the 1970s," the oil historian Daniel Yergin told the Wall Street Journal. "We are now in the days of reckoning."
Mark Tran
Wednesday August 31, 2005
An oil platform ripped from its mooring in the Gulf of Mexico rests by the shore of Dauphin Island, Alabama. Photograph: Peter Cosgrove/AP
The US today said it would release oil from its petroleum reserves to help refiners hit by Hurricane Katrina.
The move came as oil prices surged to more than $70 (£39.23) a barrel. It is designed to give refineries in the Gulf Coast area a temporary supply of crude oil to replace interrupted shipments from tankers or offshore oil platforms damaged by the hurricane.
America's emergency petroleum stockpile - almost 700m barrels of oil stored in underground salt caverns along the Texas and Louisiana Gulf Coast - is designed to cushion oil markets during emergencies.
Article continues
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Katrina, one of the most powerful storms in US history, forced operators to close more than one tenth of the country's refining capacity and a quarter of its oil output.
The prices of petrol and heating oil rose sharply after the disaster, and may increase further if the storm - feared to have killed hundreds of people along the coast - has caused permanent damage.
As oil companies assessed the damage to rigs and refineries in the Gulf of Mexico, oil prices rose. US crude was up 64 cents at $70.45 in morning trading, while Brent crude rose 29 cents to $67.86 a barrel. Yesterday, US crude soared to a record $70.85 a barrel before closing lower.
More than 1.4m barrels a day of crude production capacity - around 7% of domestic US demand - remained shut down the day after Katrina tore through the region.
Royal Dutch Shell's huge Mars platform became the latest - and potentially largest - casualty when aerial photos showed significant damage to the top of the facility, which normally produces 220,000 barrels of crude and 220m cubic feet of natural gas a day.
At least six other drilling companies, including Ensco and Transocean, reported rigs adrift after the storm, raising the prospect that dragging anchors or moorings could damage vital undersea pipelines.
Flooding now poses a serious risk for refineries, nine of which were shut down and four more left running at reduced rates. It took six months to restore output after last September's weaker Hurricane Ivan, which followed a similar path.
With the peak of hurricane season looming next month, some analysts fear more storms could push crude prices towards $80 a barrel - comparable only to the inflation-adjusted $90 a barrel period after the Iranian revolution in 1980. Oil prices are now more than 60% higher than a year ago.
"High oil prices are a catastrophe for the people," said the German economy minister, Wolfgang Clement, adding that prices were so high "not because of demand, but because of speculation".
"Depending on what we learn in the next few days, this could be the biggest oil supply shock since the 1970s," the oil historian Daniel Yergin told the Wall Street Journal. "We are now in the days of reckoning."
posted by Marcel at 9:07 AM
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