No Decision Yet On Oil Reserves

President Bush Weighs Authorizing Tapping Into U.S. Petroleum

(CBS/AP)  President Bush weighed a decision on whether to release some oil from the nation's petroleum reserves to help refiners hurt by Hurricane Katrina, administration officials said Monday.

But as CBS News correspondent Mark Strassmann reports, so far, Mr. Bush has not authorized tapping into the U.S. oil reserves to ease pressure and help control prices. Due to Katrina, oil today traded briefly above seventy dollars a barrel — for the first time ever — a good sign Americans can expect another jump in prices they pay at the pump.

The storm already forced the shutdown of an estimated 1 million barrels of refining capacity along the nation's Gulf Coast.

Administration officials, speaking on the condition of anonymity because they were not authorized to speak publicly, said Mr. Bush seemed likely to authorize a loan of some oil from the Strategic Petroleum Reserve but that details remained in flux.

In 2004, the president authorized loans from the reserve to help refiners make up for missing supplies when Hurricane Ivan struck.

Strassmann also reports that the real long-term worry is any damage Katrina caused critical infrastructure, like those rigs and underseas pipelines. Refineries sitting in low-lying coastal areas may also have flooded. Last year, as Hurricane Ivan stormed through the Gulf, oil and gas infrastructure was so damaged that repairs took months. Oil prices jumped by almost 20 percent — and that spike has never really come back down.

Earlier today, Mr. Bush got a briefing on the powerful storm from Michael Brown, the director of the Federal Emergency Management Agency, White House spokesman Scott McClellan told reporters as Mr. Bush headed to Arizona for a speech on Medicare after leaving his Texas ranch.

On the CBS News Early Show, Brown (video) indicated that it would be some time before an accurate assessment of when refineries could resume activity could be made.

"The timeline depends totally upon the storm," Brown told Early Show co-anchor Harry Smith. "It's Mother Nature, depends how strong her winds are, which direction she goes and, most importantly, depends upon that storm surge."

The Category 4 storm advanced on an area crucial to the U.S. energy infrastructure — offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi. After slamming ashore, it advanced toward low-lying New Orleans with winds of 145 miles per hour and the threat of an extremely dangerous storm surge.

"This is the big one," said Peter Beutel, an oil analyst with Cameron Hanover. "This is unmitigated, bad news for consumers."

The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the United States' domestic output, according to the U.S. Mineral Management Service.

Light sweet crude for October delivery settled at $67.20 a barrel, an increase of $1.07. Crude futures settled at $67.49 last Thursday, the highest closing price since oil began trading on Nymex in 1983.

Gasoline futures zoomed 13.37 cents to $2.0606 a gallon on Nymex, but on spot markets in New York and the Gulf Coast, prices were as much as 8 cents to 15 cents higher, according to Kloza. Nymex heating oil futures rose by 7.22 cents to $1.9088 a gallon.

Brent crude was not trading Monday, with London's International Petroleum Exchange closed for a bank holiday.

At its most fierce moments, hurricane Katrina bore down on New Orleans with 160 mph winds and a threat of a 28-foot storm surge, forcing a mandatory evacuation of the below-sea-level city.

"It's not only the suspension of production that's causing concern, it's the fact that we could see potential damage to the platforms, which would cause longer disruptions to production," said energy analyst Victor Shum of Texas-based Purvin & Gertz in Singapore.

"It looks like the perfect storm to drive prices up," Shum said.