The Marketplace Report: Opening Up the Reserves
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
The Bush administration has taken some of the pressure off anxious oil markets. Energy Secretary Samuel Bodman announced today the government will tap its emergency stockpile and loan oil to refineries that are facing delayed shipments in the wake of Hurricane Katrina. He's pledging to act quickly.
Secretary SAMUEL BODMAN (Department of Energy): We'll be able to start providing fuel oil to the refiner as soon as tomorrow. So I think we've been pretty responsive to those needs.
CHADWICK: Soon after the Energy secretary's announcement, crude oil prices did fall in New York. MARKETPLACE New York bureau chief Bob Moon joins us now.
Bob, what is the government trying to do here? I guess drive down those prices. It's working.
BOB MOON reporting:
Yeah, this is aimed at giving refineries an alternative source of crude oil temporarily to make up not only for the huge amount of production that's been lost from offshore oil platforms out on the Gulf, but also to take the place of shipments that have been interrupted by the suspension of shipping up the Mississippi River and the loss of two key tanker terminals along the Louisiana coast. Those two terminals combined handle more than 20 percent of all crude oil imported into the US, and workers are still trying to determine just how long it might take to get those back in operation. You have to love the analyst-speak here. I have one analyst report in my hand here that says, `The impact of Katrina has been to produce a significant discontinuity.'
CHADWICK: A discontinuity. Well, we mentioned that crude oil prices fell a little on the announcement. What about gasoline prices? How's that market doing?
MOON: Yeah. Oil prices nudged below 70 bucks a barrel, but gasoline prices keep going up. A lot of analysts are warning that that's the real concern here; that you can provide all the crude oil you want, but if a lot of those refineries along the Gulf Coast won't be operating for who knows how long, that's going to put tremendous pressure on gasoline supplies. Today, October gasoline futures surged by almost 20 cents a gallon here in New York. That means wholesale gas selling at $2.67 a gallon, which is almost 75 cents higher than prices were just this past Friday; now retail prices, they say, will push past 3 bucks a gallon in a matter of days, maybe to as high as 3.20 a gallon by next week. And the Associated Press is reporting today that wholesale gasoline suppliers have started to limit the amount of fuel that they sell to retailers in certain markets. That's to make sure that they don't take delivery of more fuel than they actually need.
CHADWICK: So how much of a dent will these rising prices make in the overall US economy, do you think? Anyone have an idea?
MOON: Well, actually, there are some estimates out there. Merrill Lynch economist David Rosenberg figures that if oil prices stay at these sky-high levels, that it could actually shave about $30 billion off of US economic growth.
Today in the "Marketplace" newsroom, by the way, we'll be continuing to watch these serious financial effects from the big hurricane.
CHADWICK: Thank you, Bob. Bob Moon of public radio's daily business show "Marketplace," produced by American Public Media.
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