Reply #7: Another story on this issue....

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Oil Prices Fall as U.S. Facilities Restart
By EDITH BALAZS
Associated Press Writer

BUDAPEST, Hungary — Crude oil prices eased Friday and gasoline futures fell for the first time in a week as investors engaged in mild profit taking. Providing some reassurance was news that several energy facilities on the U.S. Gulf Coast started up again after Hurricane Katrina.

Japan, meanwhile, said it was considering releasing some of its strategic stockpiles to meet shortages in the United States. And EU security affairs chief Javier Solana said European Union members are making offers to provide oil to the United States from their strategic reserves.


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An oil platform seen at Maracaibo lake in Cabimas, Venezuela, Thursday, Sep.1, 2005. The U.S. government has yet to respond to Chavez's offer to send planeloads of aid teams from the Simon Bolivar Humanitarian Aid Force, which includes some 2,000 soldiers, firefighters, volunteers and other specialists experienced in dealing with disasters. Venezuela, the world's fifth largest oil exporter, also pledged US$1 million in aid through its Citgo Petroleum Corp., plus fuel to help in hard-hit areas.(AP Photo/Ana Maria Otero)
Listen Now: Smith reports the administration is expected to act soon to release crude oil from the nation's strategic reserve. (requires Real Player)
But in an ominous sign, crude oil contracts from November thru February — traditionally high demand months — were all trading above $70 a barrel.

The front-month October light, sweet crude contract on the New York Mercantile Exchange fell 37 cents to $69.10 a barrel in European electronic trading. The contract reached an all-time high of $70.85 on Aug. 30.

Gasoline futures fell nearly 6 cents to $2.3515 a gallon, but is still twice the price from last year. Heating oil was down over five cents to $2.1450 a gallon.

On London's International Petroleum Exchange, October Brent fell 28 cents to $67.44 a barrel.

While the full impact of spiking oil prices, which are some 60 percent higher than a year ago, on world economic performance and consumer habits is impossible to assess at the moment, signs of warning are accumulating.

Recent high oil prices could trim economic growth worldwide if they remain at current levels, Fred Bergsten, director of the Institute for International Economics, a policy research organization in Washington, said Friday.

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.

"With continuing strife and tension in several of the world's oil producing hot spots, including Nigeria, Iraq and elsewhere in the Middle East, it would take only relatively minor supply disruptions, or another hurricane, to tip the market over the edge," he added.

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. No company breakdown was available, said Tim Sampson, an API spokesman.

President George W. Bush agreed earlier this week to tap the U.S. Strategic Petroleum Reserve. ExxonMobil Corp. has received a 6 million barrel loan from the emergency stockpile, Dow Jones Newswires reported Friday.

Japan's Ministry of Economy, Trade and Industry said it had received a call exploring the option of releasing some oil reserves from the International Energy Agency, a Paris-based oil market watchdog under the Organization for Economic Cooperation and Development.

Japan has one of the largest petroleum reserves in the world, with 320.7 million barrels as of June 30.

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.

A newly released 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.

Last year's Hurricane Ivan knocked out more than 40 million barrels in total and sent petroleum prices soaring. Analysts are saying Katrina has the potential to cause as much — if not more — damage to energy markets, where it has already been compared to the oil shocks of the 1970s.

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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.

September 2, 2005 - 5:43 a.m. EDT

<link> http://www.ajc.com/business/content/shared-gen/ap/Finance_General/Oil_Prices.html