Associated Press
Update 7: Gas, Oil Prices Fall More Than $1 a Barrel
09.02.2005, 10:31 AM
Crude oil prices dropped more than $1 a barrel and gasoline futures fell sharply Friday as key allies discussed releasing supplies from their stockpiles to help offset U.S. shortages that have driven retail gas prices in some parts of the country above $3 a gallon.
The International Energy Agency said it was in talks with its members on tapping strategic oil reserves to help the United States in the wake of energy industry outages caused Hurricane Katrina and European officials said nations were ready to help.
Light sweet crude for October delivery on the New York Mercantile Exchange fell $1.42 to $68.05 a barrel in electronic trading by afternoon in Europe.
Gasoline futures tumbled nearly 18 cents to $2.2295 a gallon, their first decline this week.
Retail gasoline prices have soared in many parts of the United States in the wake of Katrina and the price spike has triggered thousands of consumer complaints of price gouging.
The IEA, a Paris-based oil market watchdog, expects to reach a decision quickly but needs to "unanimous agreement to release strategic reserves," IEA spokeswoman Gundi Gadesmann said.
German Chancellor Gerhard Schroeder said the United States has asked IEA members to provide oil and called for an international agreement on releasing individual countries' reserves instead of letting countries decide individually.
In Washington, the Bush administration expects to release 2 million barrels a day of crude oil and refined gasoline from U.S. and international emergency government reserves to counter supply disruptions, administration officials said Friday.
EU security affairs chief Javier Solana said European nations are ready to offer oil from their strategic reserves. Japan also said it was in talks about releasing some of its strategic stockpiles to meet shortages in the United States.
IEA member countries are holding some 4.1 billion barrels of public and industry oil stocks, of which roughly 1.4 billion barrels are government-controlled for emergency purposes.
In other trading Friday, heating oil fell nearly 11 cents to $2.0930 a gallon.
On London's International Petroleum Exchange, October Brent fell US$1.70 to US$66.02 a barrel.
Oil prices are about 60 percent higher than a year ago, and pose a risk to worldwide economic growth if they remain at current levels, said Fred Bergsten, director of the Institute for International Economics, a policy research organization in Washington.
Bergsten said the three global recessions since World War II were all driven by spikes in oil prices, and although the world economy is currently very strong, the current jump in oil prices looks pretty serious.
"This could certainly dampen growth by a percentage point or two, and if it does, then you're getting pretty close to a global turndown," he told Dow Jones Newswires after giving a speech in Tokyo.
Axel Busch, an analyst at Energyintel based in London, said the temporarily halted flow of crude oil from the Middle East to the U.S. Gulf of Mexico coast may have all but "wiped out" the world's daily excess capacity of around 1.5 million barrels that is used to offset any unplanned production outage.
"The world's crude comfort cushion has in reality disappeared," Busch said.
Some fuel pipelines began restarting operations Friday, but the product remains in short supply after Hurricane Katrina shut down nine Gulf Coast refineries, disrupted gasoline pipelines to the Midwest and East and stopped 90 percent of the oil production in the Gulf of Mexico.
The Gulf is responsible for around 30 percent of U.S. crude production and quarter of its gas. A large portion of U.S. oil imports also arrive at Gulf Coast ports.
The U.S. federal Minerals Management Service said the percentage of oil offline in the Gulf of Mexico was around 90 percent of total output while gas around 79 percent of total daily production. Total lost oil output since Aug. 26 was 7.44 million barrels.
Hurricane Katrina damaged or displaced an estimated 58 Gulf of Mexico oil platforms and drilling rigs, according to the American Petroleum Institute. Among those, 30 rigs and platforms have been reported lost.
Panic buying and delayed gasoline deliveries sparked shortages at a number of gas stations across the United States, mostly along the East Coast and in Midwest states. Station owners said many of the shortages were temporary.
An Associated Press poll Thursday showed 24 percent of Americans listed soaring fuel prices as their chief concern - second only to the war in Iraq - as gas prices jumped by as much as 50 cents overnight in some states.
Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.
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