Gas Prices Hold Steady Despite Oil Field Shut Down

Gas Prices Hold Steady Despite Oil Field Shut Down

Wednesday, August 9th 2006

Gasoline prices held steady today, the AAA reported, despite the prospective shutdown of an Alaskan oil field that supplies about 2.6 percent of the nation’s crude oil production.

The national average price for a gallon of regular was $3.036, the same as the previous day, the association reported. Even on the West Coast, where much of Alaska’s oil is refined, prices were little changed.

And there were indications that the cutoff of supplies may not be as large as initially feared. As much as half of the 400,00 barrels a day that the Prudhoe Bay oil fields normally produce could continue to flow, news agencies quoted Samuel Bodman, the Secretary of Energy, as saying.

The giant oil company that operates the field, BP, said late Sunday night that it had found severe corrosion in pipelines serving the field and would have to shut the field down while repairs are made.

Although it may take months to replace the 16 miles of feeder pipes that have been found to be corroded and, in one location, leaking small amounts of oil, the main Trans Alaska Pipeline remains in service. It may be possible to use other feeder pipes to transport crude oil from parts of the Prudhoe Bay field to the main line for shipment to the lower 48 states.

Bob Malone, the chairman of BP America, said the company would work to develop a parallel feeder network to keep the field at least partly in production as the repairs are made.

Speaking at a press conference on Monday, he said the company was looking at ”opportunities that we feel technically competent that we can run certain portions of the field and continue production safely.”

Other BP officials said alternate pipelines were identified and used after an earlier oil spill. The inspections that found the corrosion problem were undertaken after a major spill in March.

Nevertheless, the Energy Information Administration, a part of the Energy Department, said the supply interruption from Alaska and the summer heat wave would drive up the price of oil up in August by $3 a barrel on average, to $76.50. That is roughly where the benchmark near-month contract for oil was trading at midday on the New York Mercantile Exchange, off slightly from Monday’s close.


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