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Relief is on the way for gasoline supplies

WASHINGTON—The Bush administration announced a series of measures Thursday designed to ease a nationwide gasoline supply crunch, including making its first loan from the Strategic Petroleum Reserve and allowing foreign-registered vessels to deliver oil between U.S. seaports.

The Energy Department announced it would release 6 million barrels of oil from the reserve to ensure that ExxonMobil Corp. has sufficient crude oil supplies to make gasoline. That first loan, which is bigger than all loans from the emergency reserve during last year's Hurricane Ivan, went to produce more gasoline at ExxonMobil's Baton Rouge, La., refinery.

The department also approved a loan request from Placid Refining Co. LLC to release 1 million barrels of crude oil from the reserve. The small refinery in Port Allen, La., supplies motor fuel for the Southeast and jet fuel to the military.

President Bush cautioned Americans Thursday to expect a "temporary disruption" to gasoline supplies and urged conservation. A day earlier, he lifted federal anti-pollution restrictions on gasoline in a bid to prevent shortages because of oil production damage from Hurricane Katrina.

Bush detailed additional steps to ease the supply disruptions caused by Katrina's roar through the Gulf Coast region, which knocked out about a tenth of the nation's refining capacity.

A big part of the problem, he said, was that pipelines that feed refineries are inoperable or are operating only partially. He cited that the vast pipeline network operated by Colonial Pipeline, which supplies much of the Southeast with oil, is operating at 50 percent of capacity. The company said in a statement that it expects to be delivering oil at 86 percent of its normal capacity by the middle of next week.

Oil tankers are being deployed to make up the difference by delivering more oil to seaports. U.S. law restricts the transport of oil between two domestic seaports to U.S.-flagged vessels, but "there are currently not enough American ships to move the oil and gasoline to where it's needed," Bush said. He ordered a temporary lifting of the restriction, which was originally designed to protect American jobs.

The president also tried to comfort motorists, who are paying more for gasoline each day at the nation's service stations.

"Steps we're taking will help address the problem of availability, but it's not going to solve it. Americans should be prudent in their use of energy during the course of the next few weeks," he said. "Don't buy gas if you don't need it."

The announcements came amid numerous developments that suggest Katrina's disruption of the transport of oil may not last long. The nation's largest import terminal, the Louisiana Offshore Oil Platform, said Thursday that it will reopen for business on Friday. It can handle 1 million barrels of oil a day.

The Coast Guard announced that the Port of New Orleans is reopening to shallow-draft vessels, such as the barges that carry fuel and grains along the Mississippi River.

While important, the developments won't provide immediate relief in the southeastern United States. In Virginia, Georgia, North Carolina and Florida, retail gas stations ran low on gasoline or were out of it as supplies dwindled from the tattered Gulf Coast region.

Robert Poma heard the radio reports of panicked buying on Wednesday. He filled up his Honda Accord in Marietta, Ga., and then went home to get his Chevy Suburban.

"I found a Shell station selling regular for $3.49 a gallon. The tank fill-up for the Suburban alone was $132.66. Yes, $132.66," he told Knight Ridder. "Some stations were totally out. I paid it with others waiting and was grateful I got it. I never thought I would say that."

Three days after Katrina's landfall, the oil industry remained relatively mum about the extent of damage to offshore oil production and onshore refining. The Coast Guard reported that at least 20 offshore oil rigs or platforms had sunk or were adrift in the Gulf of Mexico.

The U.S. Minerals Management Service reported on Thursday a 5 percent gain in oil production in the Gulf of Mexico, but 90 percent of production was still inoperable. Since Katrina's landfall, offshore oil production fell by 7.4 million barrels.

At least eight refineries along the Gulf Coast were in Katrina's path and were forced to shut down or reduce output.

Some started to get back in order.

"Great news! Power has been restored at our St. Charles refinery!" said Mary Rose Brown, a spokeswoman for Valero Energy Corp. in San Antonio.

Valero, which owns the largest number of refineries in the United States, also said Thursday that it had asked and received 1.5 million barrels to supply three of its refineries. Brown said two newly acquired refineries in Lima, Ohio, and Memphis, Tenn., lacked sufficient oil supplies.

"Both Lima and Memphis run crude from the Gulf of Mexico. Ninety percent of the Gulf of Mexico crude is still shut in. Without that crude, the Lima and Memphis refineries had to throttle back production," she said.

The emergency supplies would also help a third Valero refinery in Krotz Springs, La., return to full production by Sunday, Brown said.

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(c) 2005, Knight Ridder/Tribune Information Services.

GRAPHICS (from KRT Graphics, 202-383-6064): 20050901 KATRINA gas price, 20050901 KATRINA pipelines

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