August 31, 2005 at 2:40 PM CDT - Updated July 10 at 9:26 PM
by Eileen Putman, Associated Press Writer
Energy Secretary Samuel W. Bodman said Wednesday the Bush administration has decided to release oil from federal petroleum reserves to help refiners affected by Hurricane Katrina. An announcement was expected later in the day.
The move is designed to give refineries in the GulfCoast area a temporary supply of crude oil to take the place of interrupted shipments from tankers or offshore oil platforms affected by the storm.
The government's emergency petroleum stockpile nearly 700 million barrels of oil stored in underground salt caverns along the Texas and Louisiana Gulf Coast was established to cushion oil markets during energy disruptions.
The production and distribution of oil and gas remained severely disrupted by the shutdown of a key oil import terminal off the coast of Louisiana and by the Gulf region's widespread loss of electricity, which is needed to power pipelines and refineries.
Bodman, speaking on CNBC, said the decision to release reserves was made late Tuesday.
"In a word. It is going to be done," Bodman said. "Last evening it was approved and I think you'll be seeing an announcement about it later in the day. So we are doing everything we can to be responsive."
He said the reserve was contained in five sites, four of which are operative. The site in New Orleans is n ot.
Bodman said it was too early to say how much oil would be released.
He said his department was dealing with inquiries from three companies about geeting oil from the reserve. On Monday, Citgo Petroleum Corp. asked for 250,000 to 500,000 barrels to ensure that its Lake Charles, La., refinery doesn't run out.
"There is an issue with respect to getting electrical power so that we can operate the various pipe lines that supply fuel to the rest of the country," he said, noting that these facilities "deliver finished products, diesel and gasoline, to the Northeast and to the Southeast."
"Our job is to get the infrastructure going again," Bodman said. "To the extent that we have delays in getting these pipelines functioning, then were are going to have the potential for gasoline shortages." Bodman said the administration will "do everything we can do to get fuel available to the rest of the country."
Of tapping the Strategic Petroleum Reserve (SPR), Bodman said: "Technically it's called an exchange of oil that we deliver today and that we will get oil back plus some interest, if you will, in the future. We will be tapping that today."
The extensive damage to oil platforms and refineries in the Gulf of Mexico sent crude-oil prices surging back above $70 Wednesday as the realities of the long-term effects of the hurricane took hold. Destruction to refineries that produce much of the unleaded regular and premium-grade gas used was sure to sharply tighten already tight supplies, driving prices up not only on the trading floor but also at the pumps.
Interviewed on the Fox News Channel, Bodman was asked if price gouging is taking place.
"I would like to believe that in this time of crisis that all of us are going to pull together to try to deal with this very difficult circumstance and situation that's confronting not just this region, but this country," he replied. "We're hopeful of that, but if we have some bad actors, we have a mechanism to deal with it."
Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.