Transcripts

The Problem At Prudhoe Bay Points Out Problem Spots In Our Energy Policy

PAUL KANGAS: Oil giant BP said today it is studying ways to avoid shutting down all of its Alaskan operations at Prudhoe Bay. Yesterday, the company said it had found leaks in the Prudhoe pipeline and a large part of it must be replaced. The Energy Department said today the country can handle a worst case scenario of a complete shut down. Still, as Stephanie Dhue reports, the developments highlight the delicate balance of the nation`s energy supply.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. won`t be running on empty from the shut down of 400,000 barrels of oil in Prudhoe Bay. That production accounts for about 2 percent of the 20 million barrels the U.S. consumes each day and can be replaced by increased imports. But the disruption is a sign of the vulnerability of the U.S. oil supply.

SAMUEL BODMAN, ENERGY SECRETARY: We shouldn`t be having this kind of a problem. It should not produce a $2 or $3 per barrel change in price. It did and the reason is clear. We have an even balance between supply and demand and therefore small blips can bring about big price changes. DHUE: Unfortunately, there`s no shortage of potential trouble spots.

DAVID SANDALOW, SCHOLAR, BROOKINGS INSTITUTION: We`ve got oil pipeline corrosion, that just arose unexpectedly. That could happen elsewhere. We have political unrest among key suppliers. That`s already been happening. When you start to layer on these types of problems, we`ve got a lot of vulnerability.

DHUE: Analysts say there is about 1.5 to 2 million barrels a day in unused production capacity worldwide. Most of that is in Saudi Arabia, Kuwait and the United Arab Emirates and will likely be tapped to make up the Prudhoe Bay shortfall. But the U.S. won`t be able to handle a much larger disruption without paying a steep price.

PAUL TOSSETTI, MARKET ANALYSIS DIRECTOR, PFC ENERGY: Another Katrina that takes out 1.5 million barrels a day or perhaps if we see further disruptions in Nigeria where we`re already missing 600,000 barrels of production, yes, then perhaps we could see the kinds of jumps in crude prices that people are concerned about, in the $10, $20, $30 type jumps. But that will not happen with this outage.

DHUE: Increasing fuel efficiency and diversifying fuel sources are key long term policy goals of the U.S. Analysts say the U.S. may be forced to meet those goals in the short term if prices at the pump continue to soar. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.