Crude oil prices fell by $2 a barrel on Friday as Europe prepared to tap up to two million barrels a day of emergency reserves to help ease a fuel crisis threatening the United States.
Petrol tanks have run down in the world's biggest consumer after Hurricane Katrina (search) tore at the heart of the U.S. energy sector in the Gulf of Mexico on Monday and shut in nearly two million barrels per day (bpd) of refining capacity.
As the crisis deepened, President Bush asked the International Energy Agency (search) (IEA) to release petrol reserves and urged Americans to conserve fuel.
Crude was off $1.57 to $67.90 after dropping more than $2 a barrel to $67.30 on the New York Mercantile Exchange (search). NYMEX will be shut on Monday for the Labor Day holiday that marks the end of driving season.
Gasoline prices, which have led the market's gains on fears that already low stockpiles would be squeezed severely, traded 19.40 cents lower at $2.215 a gallon.
The Paris-based IEA says it is still consulting members and awaiting a report on the extent of Katrina's damage to U.S. Gulf refiners before deciding on a stock release.
But European allies said they were prepared to spring to the rescue of the United States. Germany and Spain said they would back the IEA, coordinator of emergency reserves for 26 OECD countries, if it asked them to dip into stocks.
German Chancellor Gerhard Schroeder said a release of 60 million barrels over 30 days was under consideration.
"We assume that would lead to there being sufficient energy reserves in the market and, second, we would wish the pressure on the prices of oil products to be lessened," Schroeder said.
It would take about 10 days for gasoline from the continent to reach the United States once a decision is taken. Europe has already booked up to 30 cargoes of petrol to ship to the United States, leading brokers to warn of an impending vessel shortage.
President warned retailers about price gouging as New Orleans and the Gulf Coast struggled to recover from one of the nation's most savage storms.
Washington loaned out emergency crude supplies, eased environmental regulations on motor fuels and waived a shipping law to allow better flow of oil into the Gulf region, where most oil output and eight refineries were idled for a fifth day.
Some regional pipelines also started pumping supplies around the country and power was restored to a number of plants.
But the U.S. government said it might take months to recover from the killer storm, which struck at the core of an industry already running nearly flat-out to satisfy two years of exceptionally strong demand growth around the world.
Canada's oil companies could defer autumn maintenance at refineries to maximise gasoline exports south of the border.
Gasoline supply fears have overshadowed the loss of nearly all Gulf of Mexico (search) crude production, a quarter of the nation's total, which is more easily compensated with robust commercial stockpiles, strategic inventories or additional OPEC output.