WASHINGTON _America's allies pledged Friday to help ease the nation's gasoline woes by providing 30 million barrels of crude oil and gasoline from emergency supplies over the next 30 days.
The members of the Paris-based International Energy Agency, a 26-nation watchdog agency for oil-consuming nations, unanimously agreed to open their emergency supplies to help ease the shortages caused by Hurricane Katrina. The United States will provide 30 million barrels from its Strategic Petroleum Reserve and the IEA will supply the other half.
"I would imagine we would see in the early part of next week these materials launched in this direction," U.S. Energy Secretary Samuel Bodman said Friday.
The announcement marks only the second time the IEA has opened its emergency reserves. The other time was during the U.S.-led effort to retake Kuwait from Iraqi dictator Saddam Hussein.
Even before Bodman's afternoon announcement that foreign gasoline would be steaming to America's rescue, crude oil prices were dropping. They closed at $67.57, retreating from highs of about $70 a barrel earlier in the week.
In another hopeful sign, oil tankers late Friday began offloading at the Louisiana Offshore Oil Platform, for the first time since Aug. 27. The platform handles about 10 percent of U.S. oil imports and can now handle scheduled oil deliveries and the emergency oil coming from Europe.
"It's nice to see the world banding together to try and avoid an oil shock. They're taking away one of the big risks to the economy, and it's having a desired effect on the market, at least initially," said Phil Flynn, a vice president and senior energy analyst at Alaron Futures and Options in Chicago.
Oil traders also were buoyed by an announcement by the Association of Oil Pipelines, which represents U.S. pipeline operators, that hurricane damage was minimal.
"Safety assessments have revealed no damage to the pipeline system," the group said in a statement, adding that power outages and a lack of product are the bigger challenges.
Several Wall Street analysts said that economic damage from Katrina may not extend far beyond high energy prices.
"Interestingly enough, the price of oil currently is only $2 higher than it was prior to Katrina even being on the radar screen," said James Paulsen, chief investment strategist for Wells Capital Management, part of San Francisco-based Wells Fargo Bank. "I think that unless crude oil prices rise further from here, the national economic and financial market fallout from this event will diminish."
In a note to investors, Goldman, Sachs & Co. said it expected Katrina to slow the U.S. economy for the rest of the year but then fuel a construction boom.
""Growth rates for the first two or three quarters could be boosted by 1 percentage point or more, resulting in more than a full offset to the level of output by the middle of next year," the company said.
Bodman said the 30 million barrels of emergency oil from the U.S. reserves would be auctioned in a daily bid process that will begin Tuesday. It should take from 11 days to two weeks between the bid and delivery of the oil, he said.
The IEA contributions could come in the form of refined products such as motor gasoline and jet fuel, which bypasses the inoperable refineries that make about 10 percent of U.S. gasoline.
"They have indicated they will be inclined to make available to the market significant portions of their commitment ... in the form of refined products," Bodman said, citing Germany, France, Italy, Spain and Japan as nations expecting to sell emergency reserves to aid U.S. demand.
Oil analysts welcomed the fall in prices ahead of the long Labor Day weekend. It was a positive sign after a dismal week in which many parts of the nation endured rationing by gasoline wholesalers and gas lines reminiscent of the 1970s.
But the bidding process for emergency oil doesn't necessarily address an important part of the Gulf Coast problem—damage to refineries. Even if oil is available, many Gulf Coast refineries are inoperable or are running well below capacity.
It could be weeks or months before some are back in business. That could send oil prices back up next week as details of lost production and refining become more available.
"I think it's going to head right back up. You can have all the oil in the world, but you need refineries," said Ronald Madden, an Alaron commodities broker. "Don't be surprised."
(c) 2005, Knight Ridder/Tribune Information Services.
GRAPHICS (from KRT Graphics, 202-383-6064): Katrina oil
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