U.S. releases oil from strategic reserves in response to Harvey

Around 15 percent of total U.S. refining capacity has been shut in by flooding, and the retail price for gas is up about 4 percent from last week.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Updated Sept. 1, 2017 at 8:40 AM
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Aug. 31 (UPI) -- With large-scale outages to the U.S. energy sector continuing, the federal government said Thursday it authorized a release of oil from its strategic reserves.

As of Wednesday, there were 678.9 million barrels stored in the U.S. Strategic Petroleum Reserve. The U.S. Department of Energy said Thursday it authorized the release of 500,000 barrels through a pipeline to a Phillips 55 refinery in Lake Charles, La.

"The department will continue to provide assistance as deemed necessary, and will continue to review incoming requests for SPR crude oil," Jess Szymanski, a spokesperson for the Energy Department, told UPI. "Should the secretary [of energy] decide to approve additional requests for an emergency exchange of crude oil from the SPR, the public will be notified."

President Gerald Ford set the strategic reserve in motion in 1975 in part as a response to an oil embargo enacted by Arab members of the Organization of Petroleum Exporting Countries frustrated by U.S. policies on Israel. The SPR has a design storage capacity of 713.5 million barrels and was last tapped in June 2011 in response to supply disruptions triggered by unrest in the Middle East during the Arab Spring movements.

U.S. Sen. Ed Markey, D-Mass., called on the government Wednesday to release barrels from the SPR. He said it has a "proven track record" of offsetting some of the market impacts from emergencies like Middle East conflicts and hurricanes.

A Wednesday evening update from pricing group S&P Global Platts said some refiners in Texas were starting to restart their operations, though Harvey is moving east toward operational centers in Louisiana. Several pipelines, namely the Colonial and Explorer pipelines, have shut down or are operating at reduced capacity, limiting supplies to the Great Lakes and U.S. Northeast markets.

Some regional markets saw retail gasoline prices spike by about 10 percent last year when a leak was reported on a section of the Colonial pipeline. Line 1 of the system runs east from Houston, which is heavily flooded because of Harvey, and has the capacity to carry as much as 1.2 million barrels of gasoline per day -- and the disruption last year sparked a fuel emergency in some southern states.

On Wednesday, the U.S. Environmental Protection Agency extended waivers on some gasoline requirements to 12 states and the District of Columbia in an effort to cool markets dealing with storm-related disruptions. Motor club AAA estimated a national average retail price for a gallon of gasoline at $2.45 for Thursday, up about 4 percent from one week ago.

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