Bush Moves to Avert Gas Shortages

The White House took emergency steps Wednesday to ease the fuel crisis in the aftermath of Hurricane Katrina as gasoline prices at many service stations nationwide shot past $3 a gallon -- the highest in U.S. history even after adjusting for inflation.

With nearly all of the Gulf Coast oil producers, refiners and pipeline operators struggling to restart their tattered operations, the Bush administration temporarily waived key air-quality fuel standards in hopes of making gas supplies more plentiful.

The Energy Department also said it would tap the U.S. Strategic Petroleum Reserve to help offset lost production in the gulf. The region normally provides more than 25% of the 5.5 million barrels of crude oil that the U.S. produces daily.

The agency plans to lend some of the reserve’s oil to refiners that won’t have enough petroleum to make gasoline, heating oil and other products. The reserve, which holds 700 million barrels, is in underground salt caverns along the Texas and Louisiana Gulf Coast. The U.S. consumes about 20 million barrels of oil daily.

The action helped cool the rally in oil prices. The benchmark U.S. grade of light crude oil for October delivery dropped to $68.94 a barrel, down 87 cents from its record high of $69.81 a barrel set Tuesday on the New York Mercantile Exchange.

But analysts agree that the larger problem is the inability of Gulf Coast companies to refine that oil, which has raised fears of gasoline shortages and has driven prices to unprecedented heights. Nine of the region’s large oil refineries, accounting for about 10% of the nation’s ability to process crude, remained closed or seriously hobbled.

President Bush indicated that consumers should expect to shoulder pain at the pump, although the government’s actions should “help take some pressure off” of gasoline prices.

“Our citizens must understand this storm has disrupted the capacity to make gasoline and distribute gasoline,” Bush said after an aerial tour of the devastated region.

Analysts have predicted that $3-a-gallon gasoline will be widespread over the Labor Day weekend, but motorists throughout the country were paying $3 or more Wednesday.

Gasoline’s previous inflation-adjusted high occurred in March 1981 after the Iranian revolution. The price at the time was $1.417 a gallon. That price would equal $3.05 a gallon today after adjusting for inflation.

The average price of self-serve regular in California climbed Wednesday to a record $2.844 a gallon from $2.809 on Tuesday, AAA reported. Prices at some stations in the San Francisco area jumped 10 to 20 cents a gallon from the previous day.

Even the chairman of the House Energy and Commerce Committee, Rep. Joe Barton (R-Texas), said he was jolted by the run-up in prices. After paying $2.47 a gallon for gas in Texas on Tuesday morning, Barton said, he passed the same station that afternoon and saw that the price had jumped to $2.68 a gallon.

“I thought that was excessive, given the fact that the refineries in Texas are still operational and our oil production in Texas is still pumping,” Barton said, adding that he planned to investigate whether there had been price gouging in the country.

A Field Poll showed that gasoline’s rising cost was forcing many Californians to close their wallets. It found that 40% of the state’s motorists -- and 54% of those earning less than $40,000 a year -- have “cut back on other areas of spending,” such as food, clothing and dining out.

In addition, 59% of the respondents said they were driving less, according to the poll, which was taken Aug. 19-29 and had a sampling error of plus or minus 4.7 percentage points.

Pump prices also surged in the South and Midwest, where the shutdown of the Gulf Coast refineries and pipelines was expected to cause the most shortages. CNN televised long lines of motorists waiting to fill up in cities including Mobile, Ala.

Hurricane Katrina’s shock to the nation’s energy industry revived memories of the gas lines of the 1970s, when U.S. supplies were disrupted by the 1973 Arab oil embargo and the 1979 Iranian revolution.

This time the disruption hit after 18 months of surging demand for oil and gasoline, which had left oil producers and refiners with low supplies and little spare capacity.

Katrina’s jolt was “exactly what oil-market analysts feared the most this summer,” the Energy Department said in its weekly report on the industry. “We will soon see what happens when a supply shock occurs when prices are already at high levels.”

The administration’s actions were generally welcomed on Capitol Hill, but Sen. Charles E. Schumer (D-N.Y.) said “a far more muscular use” of the Strategic Petroleum Reserve “is what is needed at time when oil is over $70 a barrel.”

Lawrence Goldstein, president of consulting firm PIRA Energy Group in New York, commended the White House for taking action quickly. “They sent a very important message, and the psychological impact is important,” he said.

The Environmental Protection Agency said it would waive certain federal air-quality requirements for gasoline sold in all 50 states until Sept. 15 to help ensure that supplies could be moved throughout the country to avert shortages. The action took the steam out of gasoline’s rally on commodities markets.

Earlier, gasoline for September delivery on the New York Mercantile Exchange soared to an unprecedented $3 a gallon. That price doesn’t include taxes, transportation costs or dealers’ profits, which can typically add more than 60 cents a gallon to the retail price in California.

But after the White House acted, the contract settled at $2.615 a gallon, still a record high and up 14 cents for the session.

The energy industry, meanwhile, began what was expected to be a long, slow rebuilding process.

Surveillance teams for Chevron Corp. flew over the company’s giant Pascagoula, Miss., refinery and its Gulf of Mexico facilities to check for damage, said spokesman Mickey Driver.

“It’s much more difficult than we ever thought,” he said. “The roads are out. There’s no infrastructure. There’s no way to sustain anyone with food and water. There’s no power. We can’t deploy people to facilities when it’s not prudent to do so, and in many cases it’s impossible to do so.”

Chevron, based in San Ramon, Calif., even took the step of posting a telephone number on its website for workers to call, in hopes of accounting for its 3,000 employees in Louisiana, Alabama and Mississippi. The company also bought radio and television ads in the Gulf Coast area, pleading with workers to let the company know their whereabouts.

Murphy Oil Corp. said its refinery outside of New Orleans suffered flooding but, based on aerial views, “it’s not as bad as we thought,” spokeswoman Mindy West said. “We were also able to land a helicopter on our two deep-water platforms and everything looks OK.”

Valero Energy Corp. reported no significant structural damage to its St. Charles, La., refinery. But the facility remained dark as crews continued to pump out as much as 18 inches of floodwater.

Times staff writer Peltz reported from Los Angeles and staff writer Simon reported from Washington. Special correspondent Calvo reported from Houston.