Marketplace Report: Prudhoe Pipeline Shutdown
MADELEINE BRAND, host:
Back now with DAY TO DAY. I'm Madeleine Brand. Oil prices are up by more than a dollar a barrel today on news of big pipeline trouble in Alaska. British Petroleum shut down an oil field indefinitely because of rusting and leaking pipes. That's about eight percent of U.S. oil production.
MARKETPLACE senior business correspondent Bob Moon joins us now with more on this. And Bob, if this pipeline shutdown is already driving oil prices up, are people expecting the prices to go even higher?
BOB MOON reporting:
Well, let me be careful to draw a distinction here, Madeleine, between the impact on oil supplies and something that can, at times at least, seem totally unrelated, and that's the impact that this could have on oil prices. This news caught traders by surprise, and there may be nothing more prone to outright speculation right now than world oil petroleum supplies.
The market's already in what one analyst calls a very high anxiety mode, and he says that any real disruption can affect prices, even if there's no threat of a supply shortage. At one point today, oil prices had spiked almost two percent. That's the bad news.
Here's the good news. The Energy Department quickly tried to calm the markets today with a promise to provide oil from the country's emergency stockpile. That's the strategic petroleum reserve. If refineries ask for it, the Energy Department says they'll be in contact with these West Coast refiners to assess their needs and see if they should release some of this oil.
We're talking about the loss here, by the way, of 400,000 barrels of oil every day while the flow is shut down in Alaska's Prudhoe Bay oil field.
BRAND: Well, is there any concern at this stage that this could have a more widespread economic impact?
MOON: Wall Street seems to think so. It's already showing a big case of the jitters over this. The stock market is selling off today on inflation fears and worries that any higher oil prices could also cause slower economic growth, and that could get us into this stagflation cycle that you may have heard about.
There's also worry that this could renew the threat of inflation and cause the Federal Reserve to raise interest rates again, and monetary policy-makers are set to meet tomorrow on that question.
BRAND: And how long are the repairs expected to take?
MOON: Well, British Petroleum, BP, has said that it's unable to provide a timetable for repairs. This corrosion has apparently been found along several miles of pipeline. I spoke today to one oil analyst in Alaska who told me that it's well-documented that regular maintenance has been put off by at least a couple of years up there, so they might have some work to do. One analyst said today that he assumes that Prudhoe Bay could be out of action for some months now.
Today in the MARKETPLACE newsroom, we're learning about the CEO of Harley Davidson in our Conversations from the Corner Office.
BRAND: Thank you, Bob. Bob Moon of Public Radio's daily business show MARKETPLACE. It's produced by American Public Media.