Oil Prices Climb Despite Gov’t Statement: “Light crude for November delivery rose 11 cents to $48.46 per barrel on the New York Mercantile Exchange, retreating from an intraday high of $49. That was 24 cents below the Aug. 19 peak Nymex settlement price. Adjusting for inflation, today’s prices are still about $8 below the level reached just before the first Gulf War.
The possibility of the government loaning oil to refiners comes as oil production in the Gulf of Mexico continues to lag by 27 percent below normal at 1.2 million barrels per day, according to the federal Minerals Management Service. The agency said 9.6 million barrels of oil have been lost since last Monday, when offshore producers began evacuating crews.
U.S. oil supplies typically grow this time of year as gasoline demand tapers off and refiners briefly shut down to perform maintenance. But with additional 1.5 million barrels per day of supply lost last week due to shipping delays, refiners have had to use oil held in storage in order to produce gasoline, heating oil and other fuels.
While the Bush administration sought to help refiners, energy analysts and traders said any assistance would not undo the broader market trends that have kept prices high all year.
Fadel Gheit, senior vice president of oil and gas research at Oppenheimer & Co. in New York, said lending oil from the SPR to refiners is ‘too little, too late.’
Gheit also blamed President Bush for contributing to today’s soaring prices through its policy of augmenting the country’s emergency stockpile at a time when global demand and prices are high.
‘He scared China and India and Korea and everybody else that we were anticipating supply shortages,’ Gheit said, leading them to buy more oil than they needed and artificially inflating global demand. ‘When somebody spots the mayor loading up on bottled water in the supermarket, guess what they’re going to do?”
In the past, President Bush has resisted calls to tap into the SPR, located in Texas and Louisiana, in an effort to counter soaring prices. Instead, the White House has said that filling the reserve to its maximum 700 million barrels is a matter of national security and should not be interrupted.
The Energy Department loaned roughly 300,000 barrels of crude to Shell Oil in Oct. 2002 after Hurricane Lily.
The amount of excess oil production available worldwide is about 1 percent of total demand of about 82 million barrels a day, leaving the industry little breathing room in the event of a prolonged supply interruption, according to many analysts.”