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Administration Opens Oil Reserves

The Bush administration agreed Wednesday to release oil from emergency stockpiles to help Gulf Coast refiners hobbled by a loss of shipments due to Hurricane Katrina (search). The administration also moved to temporarily ease some pollution standards on gasoline and diesel fuel to avert shortages.

The actions were announced as President Bush returned to Washington from his Texas ranch to oversee federal relief efforts. He flew over some of the affected area on his way.

The decision to tap the Strategic Petroleum Reserve (search) was an effort to keep production of gasoline and other fuels steady. Even so, gasoline prices leaped nationwide as the extent of damage to the nation's oil-distribution network became more apparent.

Tapping the government reserves will "certainly help those companies and those refineries to function, whereas they wouldn't be functioning without a supply of crude oil," Energy Secretary Samuel W. Bodman (search) told The Associated Press in an interview.

The oil reserves — consisting of some 700 million barrels of crude oil stored in underground salt caverns in Texas and Louisiana — were last tapped in September-October 2004 during disruptions caused by Hurricane Ivan (search).

Some 95 percent of the Gulf of Mexico's oil output was out of service, according to the U.S. Minerals Management Service. Nearly five million barrels of production have been lost since Friday because of the powerful storm and the shutdown of eight refineries.

"It is clear the consequences of the hurricane have become more widespread," Stephen Johnson, the administrator of the Environmental Protection Agency, told a news conference.

The EPA 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 temporarily eased diesel fuel sulfur restrictions and rules on gasoline evaporation nationwide.

The petroleum reserve was established to cushion oil markets during energy disruptions. But Bodman said the action would do little to ease rising gasoline soaring toward $3 a gallon.

"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."

Some lawmakers have called for Bush to more aggressively tap the reserve in hopes of forcing prices down.

But the president's action is limited to just 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 — and requires the oil companies to replace the borrowed crude oil at a later time.

Bodman told a news conference he had approved the first in a series of requests from companies requesting oil from the reserve and was working on other applications. He said it was too early to tell how much oil would be released.

"We've also begun working with other agencies on planning, even before the storm came ashore, and have been in close contact with the state and local authorities assessing the overall impact of this storm on our nation's power infrastructure," Bodman said.

The administration's narrowly targeted step drew criticism from those advocating large releases from the reserve to try to drive down prices.

"The president is willing to do what it takes to relieve an oil company, but not enough to relieve the crushing burden of oil speculation and price-fixing on American consumers and small businesses," said Rep. Edward J. Markey of Massachusetts, a senior Democrat on the House Energy Committee.

Rep. Joe Barton, R-Texas, chairman of that committee, announced a congressional hearing on Tuesday on Katrina's impact on energy markets. "I hope this is the silver lining that lets us really look at building new refineries and new pipelines and diversify the location so we are not as dependent on the area that the hurricane hit," Barton said.

Bodman also ruled out action to impose a national ceiling on the price of gasoline.

"I don't think you'd find a lot of support for that," the energy secretary told CNN.

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.

Bush, who returned from his Texas vacation to chair a meeting of a White House task force set up to coordinate federal efforts, had Air Force One fly over New Orleans and other affected areas on the way to Washington.

"It's totally wiped out," he told aides at one point during the hastily-arranged inspection flight.

While on the plane, Bush took a call from King Abdullah of Saudi Arabia. "The king offered Saudi Arabia's support," said White House spokesman Scott McClellan. The world's biggest crude oil producer, Saudi Arabia has pledged to boost output by 1.5 million — to 11 million — to replace shortfalls.

Meanwhile, European nations began considering the release of their own government-controlled stockpiles of gasoline and heating oil to help stabilize markets, said officials at the Paris-based International Energy Agency.

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