WASHINGTON (AP) -- The Bush administration will release oil from federal petroleum reserve to help refiners affected by Hurricane Katrina, Energy Secretary Samuel Bodman said Wednesday.
The move, which was expected later in the day, is designed to give refineries a temporary supply of crude oil to take the place of interrupted shipments from tankers or offshore oil platforms affected by the storm.
The U.S. Minerals Management Service said Tuesday that 95 percent of the Gulf of Mexico's oil output was out of service. Oil prices surged back above $70 in European markets on Wednesday but slipped quickly to $69.56 after disclosure of the decision involving the release of supplies from the Strategic Petroleum Reserve. Eight refineries were shut down due to Katrina -- half of them producing gasoline.
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.
Tapping the federal emergency petroleum reserve will "certainly help those companies and those refineries to function, whereas they wouldn't be functioning without a supply of crude oil," Bodman told The Associated Press in an interview. But he warned that the action may not ease the skyrocketing price of gasoline at the pump.
"Will it make a major difference in the price of gasoline? Based on the numbers that I see, probably not," Bodman told the AP. "It'll help some, but we have significant refining capacity that is dysfunctional, either because they don't have electric energy or because they're flooded, or both."
The Environmental Protection Agency, seeking to avert a severe supply crunch, announced it would temporarily allow the sale of higher-polluting gasoline in Alabama, Florida, Louisiana and Mississippi because those states can't provide enough fuel to consumers that meets Clean Air Act requirements.
The agency also said those states will be allowed to use motor vehicle diesel fuel with a sulfur content higher than the 500 parts per million standard for the next two weeks through ozone season.
President Bush, meanwhile, was returning to Washington on Wednesday to oversee the federal response to Katrina. He planned to chair a meeting of a White House task force set up to coordinate federal efforts, across more than a dozen agencies, to assist hurricane victims.
Bodman said the reserve was contained in five sites, four of which are operative. The site in New Orleans is not. He 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 getting 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 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."
Interviewed on the Fox News' "Fox and Friends," 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."
