Feds to tap Strategic Petroleum Reserve

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The Bush administration announced plans to tap the Strategic Petroleum Reserve to help offset the shortage caused by Hurricane Katrina, though it’s not clear how much that will help the expected rise in fuel prices.

Energy Secretary Samuel Bodman said Wednesday, Aug. 31 that the crude oil from the reserve would become available as early as Thursday, Sept. 1. The amount has not been determined.

The American Trucking Associations applauded the decision to tap the reserve. “Any steps the Bush Administration can take to ensure steady oil supplies are welcomed by the trucking industry,” said ATA President Bill Graves. “This decision illustrates that the President is willing to take the necessary steps to ensure America’s economic well-being.”

The U.S. Department of Energy’s weekly report on average diesel fuel prices showed a tiny increase for the week ended Aug. 29 — from $2.588 to a new record of $2.590 — but that includes virtually none of the effects of Katrina, which hit the Gulf Coast early that morning.

ATA Chief Economist Bob Costello said retail diesel and gasoline prices would spike in the short term as the hurricane crippled refineries and disrupted the Colonial pipeline. Meanwhile, refineries are operating at near full capacity, so little can be done to replace the supply in the near term, he said.

Diesel prices should jump significantly this week because of the damage Katrina did to Gulf of Mexico refineries, said Chris Lee, ProMiles marketing director.

The rise in diesel prices will be directly related to the disruption of shipping traffic, Lee said. “Luckily, it looks like the impact may be minimized because Katrina went ashore at the Louisiana-Mississippi coast, as opposed to further west.”

For state-by-state diesel prices, updated daily, click here.