World governments pledge to release oil reserves

The governments of 26 countries have agreed to release the equivalent of two million barrels of oil per day from strategic reserves to cope with the aftermath of Hurricane Katrina, the International Energy Agency said.

The Paris-based IEA said its member countries ”unanimously support” the measures, which will take effect for an initial period of 30 days. The IEA board said yesterday that it will meet in two weeks to review the situation.

“This co-ordinated response will free up extra supplies to help the market deal more effectively with the disruption caused by Katrina,” British Energy Minister Malcolm Wicks said.

“This is a global oil market and so a multilateral response is the right way forward.”

France said it had agreed to contribute the equivalent of 92,000 barrels of oil per day in refined products – mainly petrol – and Spain said it will release 70,000 barrels of oil equivalent per day.

The German Economy Ministry said the country would contribute about 6% of the total. That would be about 120,000 barrels a day. Britain said it plans to release 73,000 barrels of oil a day for the next 30 days. Portugal also said it would support the IEA plan.

“This request is part of the solidarity effort toward the American people, severely affected by this meteorological cataclysm,” the French Industry Ministry said.

Katrina ravaged the Gulf of Mexico coast, shutting down 1.5 million barrels per day of oil production and two million barrels a day of refining capacity, according to the IEA.

Under the terms of the international agreements underpinning the IEA, almost half of the emergency stocks released will come from the US Strategic Petroleum Reserve. That – unlike many European states’ stockpiles – is almost entirely made up of crude oil rather than refined products including petrol.

The IEA’s American deputy head, William Ramsay, said Washington might have to review its stocks policy as a result of Katrina.

Until now, said Ramsay, a former US ambassador to Congo, ”it’s always made more sense economically to have the crude on hand and then refineries can turn it into products depending on the requirements of the market at that time".

“But this particular incident is probably going to raise questions that maybe some product stocks would be in order,” he said.

The IEA urged members Friday to prioritise petrol, and France indicated its contribution would be in refined products, mainly petrol.

The US has already begun lending crude from its strategic reserves to refineries, but needed an IEA agreement to approve a general release of emergency stocks. As part of the agreement, the Bush administration will release 30 million barrels of crude oil.

But US Energy Secretary Samuel Bodman acknowledged that plugging the shortfall of petrol was the main priority.

The additional supply should help relieve high petrol prices, he said.

Some analysts disagreed. “Don’t think that this is going to mean your pump prices are going to go down,” said Tom Kloza of the US-based Oil Price Information Service.

“What we’re dealing with is not a crude-oil crisis – it’s a petrol crisis,” Kloza said.

It’s too soon to tell how helpful these crude shipments will be, he said, as questions remain about how many refineries will remain down due to damage and for how long.

Fears of escalating fuel prices spread across the United States this week as damaged Gulf Coast refineries and fuel lines shut down. 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 midwest and east also have been partially disrupted.