Within hours of BP's announcement that it would shut down Alaska's Prudhoe Bay oil field because of pipeline corrosion and a leak, prices at the pump started a steady climb.
It's a curious phenomenon considering that analysts say U.S. stockpiles are sufficient to make up for supply disruptions, especially as refiners prepare to slow down production for the post-Labor Day period. But this announcement, which concerns about 8 percent of U.S. production, comes on the heels of the conflict between Israel and Hezbollah and fears that it might spread in the Middle East. There's seemingly no end to the uncertainty in world oil markets these days.
All of which makes BP's announcement more irritating to consumers. Knowing there is ongoing tension in the Middle East, which supplies nearly a third of the world's oil supply, shouldn't maintaining Alaskan oil delivery systems be a high priority? Seemingly, regular physical inspections would have detected corrosion problems before they became so problematic to require the shutdown of the Prudhoe Bay oil field. The shutdown is a critical issue for Alaska's state government, which stands to lose about $6.4 million a day in oil royalties and taxes. Alaska's Gov. Frank Murkowski has instituted a state hiring freeze to hedge against the revenue loss.
If regular physical inspections of the pipeline are not plausible, surely technology exists to detect leaks and compromised pipes. If the city of Denver can monitor its snaking municipal water system using an electronic system that detects leaks, surely the technology exists to report problems along an oil pipeline.
According to published reports, the pipeline corrosion and leak is yet another setback for BP, which experienced a refinery explosion last year that killed 15 people and is battling project delays in the Gulf of Mexico, among other issues. The pipeline repairs, according to BP officials, could take weeks or months.
It remains to be seen how the problem will impact the oil market — and consumer prices — in the long term. But at a minimum, BP needs to do all it can to ensure the free flow of Alaskan oil supplies, particularly in the face of an unstable Middle East landscape.