Aug. 31 (Bloomberg) -- The U.S. will tap its emergency oil reserve after Hurricane Katrina shut down rigs and refineries in the U.S. Gulf of Mexico, creating gasoline shortages and leading to record crude prices.

``Last night, I approved a company's request for a loan'' of oil from the Strategic Petroleum Reserve, U.S. Energy Secretary Samuel Bodman said in a statement today in Washington. ``The department continues to review other requests as they come in.''

President George W. Bush has responded quickly to Hurricane Katrina, suggesting that Hurricane Ivan last year taught him a lesson about opening up the reserve, created in the 1970s after the Arab oil embargo to ensure supplies and prevent shortages. Whether crude oil from the reserve will ease prices may depend on how quickly refineries in the region are able to restart.

Gasoline futures jumped to a record $2.80 a gallon on the New York Mercantile Exchange as refineries remained idle along the coast. Fuel wholesalers across most of the U.S. yesterday started rationing deliveries to filling stations and convenience stores because of the refinery and pipeline shutdowns.

Pump prices are usually 60 cents higher than the most-active Nymex futures contract, based on the 10-year average, Bloomberg data show. That suggests the national average retail price may rise to $3.22 a gallon from $2.619 yesterday.

Falling Below $70

Crude oil prices slipped after the announcement and were down 11 cents at $69.70 a barrel as of 10:21 a.m. on the New York Mercantile Exchange. Prices are up 65 percent in the past year.

Eight refineries in Louisiana and Mississippi closed during the weekend, halting at least 1.79 million barrels a day of capacity. Four pipelines carrying refined oil products between New Orleans and Baton Rouge, Louisiana, are also shut, Royal Dutch Shell Plc said. Colonial Pipeline Co., which runs the world's biggest network of petroleum-product pipelines, said it would restore shipments on two fuel lines today at the earliest.

The government's oil ``is not going to be of much help unless we get refineries running again,'' said Adam Sieminski, global oil strategist at Deutsche Bank AG in New York, before the announcement. ``Releasing oil from the SPR right now would be actually inappropriate because there would be no place to put it.''

After Katrina swept through the Gulf of Mexico and into the South two days ago, the White House said oil from the reserve is available for companies that need it. About 95 percent of the oil normally pumped from the Gulf was cut off by the storm.

Last September, when Ivan thrashed the Gulf Coast and halted most oil production in the region, Bush took 11 days to tap the reserve. Oil surged 11 percent between Ivan's arrival and the president's decision.

``Politically and economically they learned from Ivan,'' said Larry Goldstein, president of the Petroleum Industry Research Foundation in New York. ``They learned the market doesn't wait for anybody'' and the loss of supply ``makes the economy vulnerable,'' he said.

Reviewing Requests

Bodman didn't say which refinery will receive emergency oil or how much oil it requested. The department is reviewing requests for oil from other companies affected by the storm, he said. The reserve can release about 5 million barrels a day.

``We don't expect something of that magnitude, at least at this time based on what we see,'' Bodman said.

This week, prices climbed 5.6 percent during the first two days and reached a record $70.85 a barrel yesterday on the New York Mercantile Exchange.

The Louisiana Offshore Oil Port, the largest U.S. oil-import terminal, has been shut since the storm headed toward Louisiana. The port handles about 1 million barrels of oil a day, or 11 percent of U.S. imports.

About 95 percent of the Gulf region's oil production, about 1.4 million barrels a day, is still shuttered as oil companies assess damage from one of the strongest hurricanes on record. The lost supplies represent almost 7 percent of U.S. daily oil consumption, forcing refiners that are running to draw on inventories.

Bodman Talks

The reserve, located in salt caverns along the Texas and Louisiana coast, holds 700 million barrels of oil. The amount is more than twice the 323 million barrels that refiners had in the week ended Aug. 24, Energy Department figures showed.

Bodman said two days ago in a statement that he began talking with companies in the storm's path last week and was assessing Katrina's impact. White House spokesman Scott McClellan said the reserve is there for emergencies, including natural disasters.

``There was some forward leaning this time just to make sure that we were on our game,'' Stevens said yesterday in Washington.

Ivan began disrupting production and shipments in the Gulf around Sept. 13, 2004. The administration approved the first of five oil loans on Sept. 24.

Bush, as a candidate for president in 2000, criticized President Bill Clinton's decision to release 30 million barrels from the reserve two months before the election.

`Political Decision'

Last August, Vice President Dick Cheney said the reserve should be used only for a ``dire emergency,'' such as the loss of 5 million to 6 million barrels a day of imports. That would be about a quarter of U.S. demand or almost two-thirds of Saudi Arabia's output.

``Ideological resistance'' has given way to a realization that ``the administration has erred in not providing relief to U.S. refiners when there are real supply losses,'' said David Goldwyn, president of Goldwyn International Strategies in Washington.

After Ivan hit, Bush debated whether tapping the reserve ``would look like it was a political decision when they had been so critical of Clinton releasing oil before an election,'' said Goldwyn, a former assistant U.S. energy secretary and co-editor of a book entitled ``Energy and Security: Toward a New Foreign Policy Strategy. ``Now they're not having that debate.''

Gasoline prices are also affecting the administration's response, he said. U.S. retail gasoline is 40 percent more expensive than a year ago, according to the Energy Department.

Some refineries, including Valero Energy Corp.'s St. Charles, Louisiana, plant, may take two weeks to return to service. Others are still assessing damage. Exxon Mobil Corp.'s Baton Rouge refinery is operating at reduced rates because of a lack of adequate crude supplies.

Calming the Markets

Administration statements about the reserve this week helped to ``calm down'' oil markets, Sieminski said. Yesterday, traders weighed the possibility that it might take longer than expected to restart production in the Gulf, he said.

It may take weeks for companies such as Royal Dutch Shell Plc, the biggest deepwater producer in the region, Exxon Mobil, Chevron Corp. and BP Plc to fully assess the damage to offshore production platforms caused by the hurricane.

Until the companies establish timetables for restoring this output, the government's willingness to make crude available from the reserve may serve to ease shortage concerns.

``Whether it makes a physical difference or not is irrelevant,'' Goldstein said. Government statements about the national stockpile had ``a very important psychological impact because they came out early.''

To contact the reporter on this story: Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.

Last Updated: August 31, 2005 10:27 EDT