U.S. To Tap Petroleum Reserves

(CBS/AP)  Energy Secretary Samuel W. Bodman said Wednesday the Bush administration will release oil from petroleum reserves to help refiners affected by Hurricane Katrina. An announcement was expected later in the day.

The move is designed to give refineries in the Gulf Coast area a temporary supply of crude oil to take the place of interrupted shipments from tankers or offshore oil platforms affected by the storm.

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.

"So far, we have received, to my knowledge, three requests from operating companies with respect to the strategic petroleum reserve" Bodman said on CBS News' The Early Show. "It is my expectation that we'll be seeing a positive response to that. This is a decision that I made yesterday."

The potential damage to oil platforms, refineries and pipelines along the Gulf Coast drove energy prices to new highs Tuesday, with crude futures briefly topping $70 a barrel and wholesale gasoline costs surging to levels that could lead to $3 a gallon at the pump in some markets.

The buying frenzy reflected uncertainty and fear about the full extent of the damage Hurricane Katrina inflicted on key energy infrastructure.

Wednesday, oil prices swung wildly, at one point dropping more than $2 a barrel in trading on the New York Mercantile Exchange. Oil had climbed as high as $70.65 a barrel in pre-opening overseas trading before slipping after U.S. Energy Secretary Samuel W. Bodman's morning announcement that the government would release oil from its strategic petroleum reserves.

After closing at a record high of $69.81 Tuesday, oil settled today at $68.94, down 32 cents on the New York Mercantile Exchange.

Meanwhile, wholesale gasoline suppliers have begun limiting the amount of fuel they sell to retailers in certain markets in order to make sure they do not take delivery of more fuel than they actually need.

Tom Kloza, director of the Oil Price Information Service, said gas prices are going to soar.

"It's going to be a super-spike, there's no question about that, and I think this time it's not just going to be a problem of with how much you pay for gasoline but there's going to be some inconvenience in where you find the gasoline," Kloza told CBS radio affiliate WTOP.

He also said filling station lines, like those in 1979, could be seen again. October gasoline futures were almost 75 cents a gallon higher Wednesday than on Friday, before the storm hit.

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