Second refiner taps U.S. Oil reserve as Gulf output remains shut

The U.S. is granting a second refiner in Louisiana access to the country’s emergency crude stockpiles as most oil-producing platforms in the Gulf of Mexico remain offline after Hurricane Ida. 

Placid Refining Co. will receive 300,000 barrels of crude from the Strategic Petroleum Reserve, the Department of Energy said Friday, following 1.5 million granted to Exxon Mobil Corp. Thursday. The so-called exchanges require the companies to pay back in kind within two to three months, plus some extra barrels. 

President Joe Biden said Thursday the U.S. would use all the tools at its disposal to increase the availability of gasoline and ease pressure on prices at the pump. With refineries that represent nearly one-fifth of America’s crude-processing capacity, Louisiana is grappling with fuel shortages that are hindering relief efforts, while pushing up gasoline prices across the country.

The government-run supply of emergency crude—established in the aftermath of the Arab oil embargo in the 1970s and stored deep underground in salt caverns along the Gulf Coast—has been used a few times after hurricanes.

Placid will use the crude for its 75,000-barrel-a-day refinery near Baton Rouge, which is among the fuel-making plants that have restarted operations. Exxon will use it at its nearby facility.   

At least three companies have been shopping for crude grades they’d normally get from platforms in the Gulf of Mexico, according to traders. The hunt for these scarce supplies have pushed up prices for Gulf oil grades such as Mars Blend to the strongest levels in months. 

Royal Dutch Shell Plc said Thursday that its offshore West Delta-143 facilities that serve as the transfer station for all production from assets in the Mars corridor were damaged, based on initial flyover assessments.   

In addition to offshore logistics, one key piece of infrastructure that would need to swiftly return to aid production recovery is the Louisiana Offshore Oil Port. Known more commonly as LOOP, it receives crude flowing on pipes linked to offshore oil platforms. It had suspended deliveries ahead of the storm. 

LOOP handles as much as 15% of U.S. crude oil supply, and it also operates a marine terminal, some 45 miles (72 kilometers) offshore that handles imports and exports of crude transported by tanker. 

Meanwhile, pump prices are expected to reach the highest level in seven years going into the Labor Day weekend. About 12% of the nation’s crude processing capacity was shut or reduced ahead of Hurricane Ida.