President Bush has urged Americans to drive less in the wake of hurricanes and fears that our nation’s economic growth may slow down with the current cost of energy. The president also issued a directive for all federal agencies to promote the use of carpooling and public transportation for their employees and to slash their own energy use.
Bush proposed to continue the suspension of certain antipollution laws concerning diesel fuel and gasoline to help alleviate shortages and to attract imports. Bush said he would also continue suspension of the Jones Act shipping law allowing foreign tankers to carry gasoline and natural gas between American ports.
Several bills have been introduced in Congress encouraging the construction of more energy refineries to increase U.S. energy refining capacity. The last U.S. oil refinery was built in 1976 according to Reuters. Kuwait’s proposal to build a refinery in the U.S. market was described as an “interesting offer” by the president according to Reuters.
Although oil refineries in the Gulf of Mexico sustained less damage than originally feared, Hurricanes Katrina and Rita have disrupted production for two to four weeks according to the New York Times.
More than half the 15 refineries halting production due to Hurricane Rita are planning to restart production “relatively quickly” according to Reuters. The remaining refineries will take longer to rebuild from their heavy damage. Production from the Gulf of Mexico amounts to 16 percent of U.S. natural gas consumption and about percent 7 percent of U.S. oil consumption according to the New York Times.
“We’ve been in a chronic situation here where supplies have not really caught up with demand,” said Dave Costello, an analyst at the Energy Information Administration speaking with the New York Times.
Doug MacIntyre, a senior analyst with the Energy Information Administration told Reuters that national inventories of commercial crude oil were on the upper end of average before Hurricane Rita struck the Louisiana-Texas coast. Even if Gulf oil production remains offline for an extended time, these crude oil stores ought to be able to support normal gasoline production, MacIntyre continued.
Bush also pledged to loan refineries oil from the government’s petroleum reserve if serious shipping disruptions occur. Interrupted shipments to refineries damaged by Katrina already triggered the government to loan 13.2 million barrels of crude oil from the Strategic Petroleum Reserve according to Reuters.
Global Insight, a research firm, reports in the New York Times that annual energy spending by U.S. households has amounted to about $550 billion currently since year’s start. This number is up by $150 million according to the New York Times. The Federal Reserve reports that families have begun saving less money in response to higher energy costs according to the New York Times. A growing economy is still forecast as economists see the continuing housing boom and rising corporate investments outshining higher household energy spending according to the New York Times.
Other Congressional proposals include allowing the development of oil and gas production in the Artic National Wildlife Refuge. Another proposal allowing states to opt out of Congressional bans on coastal oil drilling may also lead to environmental controversy.
Conversely these proposals have been enthusiastically received by the oil and gas industry. Development of these areas is currently forbidden but John B. Walker, chairman of the Independent Petroleum Association, speaking in the New York Times said that these offshore and Alaskan areas, “could supply our nation with more than 100 years of natural gas – and save U.S. consumers upward of $500 billion.”