Oil companies forced to draw from Strategic Petroleum Reserve after Ike

| 9/15/2008

Pump prices have been unpredictable in many parts of the country as oil refineries in the Gulf Coast begin assessing damage caused by Hurricane Ike.

In five states – including Texas, Oklahoma, Louisiana, Arkansas, Mississippi and North Carolina – attorneys general have reported receiving complaints of price gouging in the wake of Hurricane Ike, according to an MSNBC news report on Monday, Sept. 15.

OOIDA member Paul Sasso of Moody, TX, was at the Flying J in Waco, TX, on Friday, Sept. 12. He said he witnessed fuel prices shoot up 30 cents per gallon – from $3.89 to $4.19 for diesel – in less than three hours. On Monday, Sept. 15, he said the price had dropped down 20 cents to $3.99 for diesel at the same Flying J.

Around the country, other consumers are also reporting fluctuating prices at the pump.
According to a report released on Hurricane Ike by the U.S. Department of Energy on Monday, 14 refineries in Texas and Louisiana, which have a total operating capacity of 3.6 million barrels per day, are shut down because of Ike.

The DOE report also said that at least 99.6 percent of the Gulf’s crude production, accounting for more than almost 1.3 million barrels of oil per day, remained shut down on Monday.

Healy Baumgardner, DOE press secretary, told Land Line on Monday, Sept. 15, that three oil companies have received oil from the Strategic Petroleum Reserve as a result of hurricane damages. Both Ike and Gustav have caused supply disruptions.

The latest request, received late Sunday, Sept. 14, to draw from the SPR was from Citgo, which requested to draw from the SPR after Gustav, but later withdrew its request.
“Citgo made a request for emergency SPR exchange oil late last evening as a result of supply disruptions caused by Hurricane Ike,” Baumgardner said. “DOE is currently reviewing their request.”

On Sunday, Sept. 14, Baumgardner said SPR began delivery of emergency oil to three companies, including Marathon Petroleum Company, Placid Oil and ConocoPhillips. Marathon will receive 500,000 barrels following supply disruption after Hurricane Gustav, while Placid Oil’s Port Allen refinery will receive 239,000 barrels and ConocoPhillips’s Wood River refinery Company will receive 200,000 barrels after Gustav and Ike.

The Department of Energy loans oil from the SPR during emergency disruptions to supply – also known as an “emergency exchange,” Baumgardner said.

“The company must replace the borrowed oil at a later date.”

However, Baumgardner said the replaced oil will not be transferred back into the SPR until after Jan. 1, 2009, because of legislation Congress passed recently.

“The SPR is a critical component of our nation’s energy and national security, serving as a key safeguard to protect the U.S. from potential disruptions to our oil supplies,” she said. Opening up the SPR to influence the market would diminish our emergency response capability.”

Besides disruption to the oil industry, the DOE is reporting that 91.9 percent of the Gulf Coast’s natural gas production remains shut down.

– By Clarissa Kell-Holland, staff writer