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| US Energy Secretary Samuel Bodman pictured with President Bush at a Cabinet Meeting in the White House |
The Bush administration plan's to release oil from the country's Strategic Petroleum Reserve (SPR) to offset production losses in the Gulf of Mexico due to Hurricane Katrina, the US Energy Department said today.
Energy Secretary Sam Bodman said in a television interview that the Department would make an official announcement later in the day. A spokesman said flows of oil from the reserve to a refiner on the US Gulf Coast could begin as early as Thursday, adding that the Energy Department was reviewing requests for loans of oil from other companies.
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| The Strategic Petroleum Reserve (SPR) is the world's largest supply of emergency crude oil. The federally-owned oil stocks are stored in huge underground salt caverns along the coastline of the Gulf of Mexico. Decisions to withdraw crude oil from the SPR are made by the President under the authorities of the Energy Policy and Conservation Act. In the event of an energy emergency, SPR oil would be distributed by competitive sale. Although the SPR has been used for emergency purposes only twice (during Operation Desert Storm in 1991 and Hurricane Ivan in 2004), its formidable size (more than 600 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool of foreign policy. |
More than 95 percent of crude oil production from the Gulf of Mexico was shut down as a result of Katrina. The Gulf is responsible for a quarter of US oil production.
The price of oil on the New York Mercantile Exchange fell to $69.70 following news of the release from the SPR.
The President authorized loans from the reserve in 2004 after Hurricane Ivan.
On Monday, Secretary Bodman said: Looking at the broader impacts on the nation, we are mindful that the affected region contributes a significant amount of our oil, gas, and refined product supply. As we assess damage, we will take the appropriate response.
"The administration has been clear that the Strategic Petroleum Reserve is a national security asset that can be used to protect American consumers and our economy in the event of a major supply disruption, including natural disasters.
"Beginning last week, we have been in close contact with our federal partners, site managers at various locations of the Strategic Petroleum Reserve, and companies that operate oil refineries to prepare for any disruption in oil production.
"As we experienced with Hurricane Ivan in 2004, the Strategic Petroleum Reserve can be used to lend petroleum to refineries if they experience shortages and are therefore unable to maintain their production. Should circumstances warrant, the President also can direct that petroleum be withdrawn from the SPR and sold.
"Over the next few days, we will continue to gain more information on the specific needs and then be able to make a better determination on how we can help."
Information on the SPR
