Will You Have to Pay Even More at the Pump?
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Energy Secretary Samuel Bodman said today it could take months for Alaska's Prudhoe Bay to resume normal oil production. But Bodman also offered reassurance that the nation's energy supplies should be adequate. Energy giant BP is temporarily shutting down its Prudhoe Bay oilfield after finding heavy corrosion in some of its pipelines there. The Energy Department is forecasting higher crude oil prices in response.
NPR's Scott Horsley reports.
SCOTT HORSLEY reporting:
The shutdown of Prudhoe Bay cuts worldwide oil production by about one-half of one percent. By comparison, last year's hurricanes in the Gulf of Mexico knocked out nearly four times that much. While a full repair in Alaska could take months, BP hopes to get some oil flowing sooner than that. Energy analyst Philip Verleger says the oil industry has plenty of experience in coping with this kind of disruption.
Mr. PHILIP VERLEGER (PK Verleger LLC): This is a business that never runs smoothly. There are always earthquakes. There are always revolutions of some sort. The story in this is that the oil industry is very sophisticated and very capable of covering a shortage - if they have time.
HORSLEY: Verleger says the industry should have time to adjust in this case. He notes that refiners and others have a lot more crude oil stockpiled now than they usually do this time of year. Verleger worried for a time that consumers might overreact to news from Alaska and rush to top off their tanks. He says that kind of panic buying can create its own shortages.
Mr. VERLEGER: The average tank is half full. You want consumers to believe that their gasoline's going to be there when they want it, so they won't rush to the station.
HORSLEY: So far, there's no sign of a run on gas stations or an immediate spike in pump prices. AAA says retail gas prices held steady overnight, at a national average of $3.04 a gallon.
White House spokesman Tony Snow echoed the energy secretary's assurances today, saying no refineries have reported any shortages. Snow added, both Mexico and Saudi Arabia have volunteered to supply additional crude if necessary.
Crude oil prices fell 67 cents a barrel today, after climbing more than $2.00 yesterday. Despite that drop, energy analyst Mike Fitzpatrick of Fimat USA is not convinced the worst of the oil crunch is behind us.
Mr. MIKE FITZPATRICK (Fimat USA): I don't think a big sigh of relief is called for at all here, and I think those that are, you know, are fooling themselves.
HORSLEY: Fitzpatrick says the Alaskan shutdown just increases pressure on an oil market that's already stretched thin by troubles in Nigeria, Venezuela, the Middle East and the Gulf of Mexico.
Mr. FITZPATRICK: You know, you have actually the bulk of the hurricane season yet to come and that could affect the Gulf area so, yeah, there's problems ahead. And problems around the world, the geopolitical problems, don't seem to me as if they're going to be very easy or very quickly solved either.
HORSLEY: Even if oil producers elsewhere can cover the shortfall from Prudhoe Bay, that won't help the state of Alaska, which stands to lose nearly $6.5 million for every day the oilfield is shut down. Alaska Governor Frank Murkowski says that's about half the state's total oil revenues.
Governor FRANK MURKOWSKI (Alaska): With about 90 percent of the general unrestricted revenue coming from oil, the state is in a very, very difficult and precarious situation.
HORSLEY: Like the oil companies, Alaska's state government has profited from high crude oil prices. They've allowed the state to build up a reserve over and above what it needs to fund services for the coming year. But, according to the governor's office, that surplus will be eroded in about two months if the Prudhoe Bay field stays shut down.
Scott Horsley, NPR News.
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