As of Thursday, August 10, 10:00 am

Background on Alaska Crude Production and Transport
Alaska ranks second, after Texas, among the States in crude oil reserves. On December 31, 2004, Alaska's proved reserves totaled 4,327 million barrels.

Although Alaska's production declined from 2 million barrels per day (bbl/d) in 1988 to 864,000 bbl/d in 2005, it is still the second largest oil producing State when Federal offshore production is excluded.

Alaskan Production

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The Trans-Alaska Pipeline Systems (TAPS) connects the North Slope oil fields with the Port of Valdez in southern Alaska. From Valdez, crude oil is shipped primarily to refineries located on the U.S. West Coast.

Shut-in and Impacts on Energy Markets
On August 6, 2006, BP America announced the shutdown of about 400,000 bbl/d of crude oil production from the North Slope Prudhoe Bay field because of corrosion discovered in the pipelines that gather crude oil from the producing wells for delivery to the Trans-Alaska Pipeline. The greatest impact of the lowered Alaskan crude oil production will likely be on the West Coast, which consumes almost all of the Alaskan oil production. Since the initial announcement, BP has been revising their production estimates.

CA and WA State Refineries Still Depend Heavily on Alaskan Crude

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The reduction in Alaska crude oil supply can be made up for in several ways. The primary means is via a drawdown of crude oil or product stocks and substitution of other supplies for the Alaskan crude oil. As of August 4, 2006, crude oil stocks on the West Coast were 2.2 million barrels higher than August 5, 2005, and U.S. crude oil stocks were over 11.8 million barrels higher. Similarly, gasoline and distillate fuel product inventories are above last year's levels for the United States (4.6 and 2.5 million barrels, respectively). Gasoline inventories for Petroleum Administration for Defense District (PADD) V (PADD V includes Washington, Oregon, California, Nevada, Arizona, Alaska, and Hawaii) were 30.2 million barrels, slightly less than last year. Distillate stocks were 12 million barrels, almost 2 million barrels more than last year. The Strategic Petroleum Reserve (SPR), which currently holds about 688 million barrels of crude oil, may also serve as a source of crude oil supply. Additional imports of crude oil and petroleum products are another feasible source of replacement supply.

EIA's Short-Term Energy Outlook (released August 8, 2006) raised the forecast for the August 2006 West Texas Intermediate (WTI) crude oil price to $76.50 per barrel, an increase of $3.00 per barrel from our forecast last month. The higher forecast WTI price is a result of the additional pressures that occurred in July and the projected reduction in Alaskan oil production. Petroleum product prices are also expected to be higher in August, particularly on the West Coast where substitute oil supplies will likely require higher transportation and processing costs.

While complete estimates of the volume and duration of reduced Prudhoe Bay crude oil production are not yet available and will not likely be for several days, the Short-Term Energy Outlook assumed that Alaskan crude oil production will be reduced by 300,000 bbl/d from EIA's expected level in August, 400,000 bbl/d in September and October, 300,000 bbl/d in November, 200,000 bbl/d in December, and 100,000 bbl/d in January, then return to full production. This production outage scenario was based on BP's initial estimate that the shutdown would last "several" months and is subject to change as further information becomes available.

Weekly Stocks and Inputs

8/4/2006 7/28/2006 change from previous week Year Ago change from previous year Crude Oil Stocks (million barrels)   US 332.6 333.7 -1.1 320.8 11.8   PADD V 53.8 55.5 -1.7 51.6 2.2 Total Motor Gasoline Stocks (million barrels)   US 207.7 210.9 -3.2 203.1 4.6   PADD V 30.2 31.9 -1.7 30.3 -0.1 Distillate Fuel Stocks (million barrels)   US 132.4 132.6 0.2 129.9 2.5   PADD V 12.0 12.3 -0.3 10.1 1.9 Crude Oil Refinery Inputs (thousand barrels per day)   US 15,608 15,516 92 15,972 -364   PADD V 2,790 2,751 39 2,542 248

source: EIA. This Week in Petroleum, August 9, 2006