Crude oil to be released from reserve stocks

The US, in conjunction with other oil consuming nations, expects to release 2 million barrels a day of crude oil and petrol from US and international emergency government reserves to counter supply disruptions caused by Hurricane Katrina, administration officials said today.

The move reflects a much broader use of the US strategic petroleum reserves and opens the way for millions of gallons of petrol imports from European government stockpiles to try to stem soaring petrol prices in the US.

A decision was expected to be announced by the Paris-based International Energy Agency later today about the co-ordinated release of crude and refined products by agency members, said an administration source.

The release would total 2 million barrels a day, with the US contributing 44% of that amount in crude from the Strategic Petroleum Reserve. Administration officials hope the other 56% would be in the form of petrol now in European government stockpiles.

Technically, even the release of supplies from the US-based SPR is a matter of joint decision-making by the US and its European partners. Up until now, the administration has loaned oil from the SPR to several refineries, but has not had a general release of crude to counter supply problems. Under international agreements, such a release must be co-ordinated with other IEA members.

Fears of escalating fuel prices spread across the country this week as damaged Gulf Coast refineries and fuel lines shut down. Gas prices on jumped 35 to 50 cents a gallon overnight in many places.

Yesterday, US President George Bush urged Americans to be prudent in their consumption of energy, but called the hurricane a “temporary disruption” to gasoline supplies.

The IEA, an oil market watchdog formed under the auspices of the Organisation for Economic Co-operation and Development, is in consultations with its members on the release of some of their oil products inventories after Katrina shut down some 90% of production facilities on the US coast of the Gulf of Mexico.

Energy Department spokesman Craig Stevens said he could not comment about any discussions with the IEA on supplies.

But he added that the administration has made it clear that government oil reserves can be used for significant supply disruptions including natural disasters such as Hurricane Katrina.

Katrina has disrupted 90% of the oil production in the Gulf of Mexico.

Officials believe that is above the 2 million barrel-disruption that is required to trigger IEA action.

Europeans have indicated support for helping the United States.

“Certainly we will support the American request,” German Chancellor Gerhard Schroeder said.

An administration official said it is hoped the European portion of the release would be in the form of gasoline. Unlike the US, the Europeans have government stockpiles in both crude and refined products.

Speaking on Sky News, EU security affairs chief Javier Solana said the US administration has approached several EU member states individually for help. “Whatever they ask for, it will be given from the reserves of oil that the different (EU) countries are providing,” he said.

The increased gasoline imports would ease the growing concern about gasoline supplies that have caused gas stations in some areas to shut down and others to close early.

Nine Gulf Coast refineries have been shut down by electrical problems, flooding and other damage caused by Katrina. Two major pipelines carrying gas to the midwestern and eastern US also have been partially disrupted by the Hurricane, reducing the flow of gasoline and causing retail prices to soar in some areas.