U.S. weighs oil products reserve after Sandy: Energy Secretary Moniz

By Ayesha Rascoe

WASHINGTON (Reuters) - The Obama administration is considering whether an emergency stockpile of gasoline and other oil products would ease future fuel shortages due to natural disasters like Hurricane Sandy, which smacked the East Coast in October, U.S. Energy Secretary Ernest Moniz told Reuters.

Sandy barreled into the New Jersey and New York coasts with heavy winds and massive storm surges, snapping powerlines, flooding roads and destroying homes and buildings. Its devastation also laid bare the vulnerabilities in the nation's fuel distribution networks.

"The degree of interconnection between different infrastructures was not fully appreciated as it might have been until you saw it in action," Moniz told Reuters in an interview on Thursday.

"The connection between the electricity disruptions and fuel disruptions was enormous," Moniz said.

In the days after the storm hit, many motorists were left stranded at the pump. The Energy Information Administration estimated that as many as 67 percent of the gas stations in the New York metropolitan area were not open, either because they had no power to their pumps or had not been able to take delivery of more fuel.

The assessment of a possible oil products reserve comes as climbing U.S. oil production brings the composition of the nation's fuel stockpiles into focus. Some analysts have said the government should consider revamping its massive stores of emergency crude oil in light of record breaking petroleum output.

In his office on the seventh floor of the Energy Department's sprawling Forrestal building, Moniz detailed the agency's work to map out the nation's energy infrastructure and amp up coordination between industry and government so both will be better prepared for the next disaster.

The department is taking another look at the findings of a 2011 internal report on the creation of a reserve of crude oil products for the northeast and the southeast. The earlier report was not released to the public.

Moniz said it was important that this latest effort take into consideration the regional conditions that often affect fuel disruptions.

The southeastern region, for instance, is vulnerable to actual fuel shortages if the major pipelines carrying oil products are not available. While the northeast, is vulnerable to disruptions at oil refineries and in fuel distribution.

"The analysis is being updated to try to get the economic proposition of what would give the highest probability of supporting different kind of disruptions and what's the economic case for the size of reserves," Moniz said.

He declined to say when the new analysis would be completed.

Moniz, 68, is a nuclear physicist who most recently was a professor at the Massachusetts Institute of Technology. He took the helm of the Energy Department in May, and had served as an undersecretary of energy during the Clinton administration.


The creation of an oil products reserve is not a new idea. Such a stockpile was considered by the administration of President George W. Bush in the aftermath of Hurricane Katrina.

"All of a sudden people realized the whole U.S. refining industry can be brought to a grinding halt pretty quickly," said John Shages, who oversaw the U.S. oil reserves during the Bush and Clinton administrations.

Shages said the department weighed constructing a product reserve at a site in Mississippi as part of plan to expand the nation's Strategic Petroleum Reserve to 1 billion barrels. That plan eventually fell to the wayside along with the prospects of expanding the reserve.

Established in the 1970s after the Arab oil embargo, the SPR can currently hold up to 727 million barrels of crude oil in four vast underground salt caverns in Texas and Louisiana.

While the SPR is able supply crude oil to domestic refiners in the case of an emergency, some regions may not have access to alternative fuel supplies leading to "localized disruptions," an Energy Department official, David Johnson, testified to the Senate energy committee in May 2009.

The United States does have a heating oil reserve, set up in 2000, which currently can hold up to one million barrels of ultra-low sulfur diesel.

The Obama administration released more than 120,000 barrels of diesel from the heating oil reserve after Sandy to help with the emergency response efforts.


Facing a new storm season, the department is also attempting to keep track of the nation's rapidly changing and often fragmented energy infrastructure, Moniz said.

Geospatial mapping is helping the department to pinpoint the locations of retail gas stations, so that in the case of widespread outages the government would know where to deliver emergency generators.

The current shale oil and gas boom is also transforming the way fuel is moved around the country. Historically, oil pipelines connecting the U.S. Gulf coast to the Midwest were designed to move oil from the southern refining hub up north.

Record oil production from the Bakken shale formation in states like North Dakota has begun to reverse this pattern.

While Moniz said the change in oil flows is not necessarily having a major impact on emergency response, the department is constantly updating its modeling of the nation's energy network.

"We do need to be on top of what the infrastructure is and what it needs to be," Moniz said.

(Reporting by Ayesha Rascoe; editing by Ros Krasny and Jackie Frank)