President releases crude oil reserves because of refinery shortage ... why?

[Monocracy]

CNN Article: http://www.cnn.com/2005/POLITICS/09/26/bush.ap/index.html

“A lot of our production comes from the Gulf and when you have a Hurricane Katrina followed by a Hurricane Rita, it’s natural, unfortunately, that it’s going to affect supplies,” Bush said after a briefing at the Energy Department.

“It’s important for our people to know that we understand the situation and we’re willing to use the Strategic Petroleum Reserve to mitigate any shortfall in crude oil that could affect our consumers.”

1. There is no shortage of crude oil, it’s hovering at about $65 a barrel.

2. There is a shortage of refinery capacity because of the hurricanes. Gasoline is now 30 to 40 cents more expensive than it was when oil was $70 barrel because of that.

3. How is releasing crude oil from reserves going to help our shortage of refined oil?

[John_Mace]

@Monocracy

There is no shortage of crude oil, it’s hovering at about $65 a barrel.

Are you sure? While I suspect this decision is largely poltical, there were several offshore drilling rigs (ie, producers of crude) that were affected by the 2 recent storms. It might be quicker to get oil from the SPR into the refinery pipeline than to get it from overseas. From your cite:

The nation’s four Strategic Petroleum Reserve sites on the Gulf Coast, two underground caverns in Texas and two in Louisiana, hold nearly 700 million barrels of oil. In the aftermath of Hurricane Katrina, the federal government provided several refineries with oil from the reserve to make up for supply losses.

[Ravenman]

There had been shortages of crude oil deliveries to various refineries around the country when Katrina hit, because various pipelines were knocked down for a while. Deliveries of oil from the SPRO put those refineries back online. So, to point number 1, just because there’s lots of oil in the world doesn’t mean that the oil is getting to the right places. There’s a lot of water in the world, too, but that doesn’t mean that Arizona’s not a desert.

As for whether Rita knocked out oil deliveries to other refineries, I have no idea.

[Monocracy]

So the refineries are only down because crude oil supplies can’t reach the refineries?

[Ravenman]

There are lots of refineries that are not in the immediate Gulf Coast area. Here is a map. My understanding is that the refineries in the Kentucky/West Virginia/Ohio region typically received a very large percentage of their crude oil from Louisiana ports. Sicne the Louisiana ports were knocked out, if oil were not released from the SPRO, these refineries would not have had access to oil for a substantial amount of time. That could have meant gas shortages in those states.

Again, I have no idea what effect Rita has had on pipelines to refineries in states other than Texas and Louisiana. And, obviously, refineries in the Gulf Coast region have been damaged by the storms.

Question for you: are you asking questions and looking for answers, or trying to start a debate about something?

[John_Mace]

@Monocracy

So the refineries are only down because crude oil supplies can’t reach the refineries?

All it takes is one to be down for that reason, and prices will jump at least temporarily.

[Monocracy]

@Ravenman

Question for you: are you asking questions and looking for answers, or trying to start a debate about something?

I almost asked this in GQ, but then changed my mind.

The impression i’ve gotten from the media, and i thought i’ve been following pretty closely, is that the refineries weren’t producing as much because the plants were damaged, not that they weren’t getting the raw materials. Am i alone or is this what the general public thinks, also?

It shouldn’t be that hard to ship a bunch of crude oil to the refineries from the national reserves, seeing as all the reserve sites are located in Loiusiana and Texas. Why has the price of gas been higher for so long?

[Loopydude]

I think there are problems both with supply and distribution as well as refining capacity caused by the hurricanes. So, releasing some of the crude reserves will mitigate the former, but won’t help with the latter, obviously.