By Kirsten Korosec | August 29, 2012, 1:00 AM PDT
Hurricane Isaac has forced oil and gas operators to shut in more than 93 percent of production in the Gulf of Mexico and energy companies to close at least five refineries, developments that are fueling speculation the White House will release oil from the Strategic Petroleum Reserve.
Isaac made landfall in southeastern Louisiana late Tuesday as a Category 1 storm with maximum sustained winds of 80 miles per hour.
Press secretary Jay Carney told reporters earlier Tuesday that releasing oil from the SPR, which currently holds about 696 million barrels, is an option that remains on the table, according to a transcript of the gathering provided by the White House. Carney did not provide further detail.
Debate over whether the Obama Administration will release oil from the SPR has escalated as gasoline prices have risen and oil production in the Gulf has shut down due to the storm. Tight oil supplies have been compounded by an explosion at Venezuela’s largest refinery.
Some energy analysts have predicted the government will announce a release from the SPR by next week, Bloomberg reported. More than a few, including an editorial by Bloomberg, have speculated the oil release would be more of an election tactic, not because it’s a true emergency.
The Obama Administration has drawn down the reserve once before. During July and August 2011, about 30.64 million barrels were sold in response to sustained interruptions in global supplies due to civil unrest in Libya. President Obama authorized the sale as part of a larger coordinated release by the International Energy Agency countries.
The effect was minimal for consumers buying gasoline. The price at the pump declined about 2 percent. Prices rose again a week later.
Until now, operators have shut in production as a precautionary measure. Views over releasing oil from the SPR could change if oil and gas infrastructure sustains significant damage from the storm.
The infrastructure hasn’t fared well in other weather events. Katrina, the Category 3 hurricane that made landfall seven years ago, killed 1,800 people, caused billions of dollars in damage and devastated oil and gas installations taking out 4.5 million barrels a day of refining capacity.