Money Matters - Simplified

Oil supply disruption could lead to further rise in gas prices

A spill at one of the pump stations of the Trans Alaska pipeline has led to disruption in the oil supply. It could lead to a further rise in the already high gas prices, at least temporarily.

A leak discovered on Saturday morning has led to the shutdown of the Trans Alaska Pipeline System, operated by a consortium in which BP holds the largest share. Though the spill is minimal but it can lead to a short term increase in the already above normal prices of gas.

The engineers of Alyeska Pipeline Service, who operates the pipeline, discovered the leakage in the basement of Pump Station 1, which pushes the oil down the 800 mile pipeline.

Operator company says little damage done
The operator company says that no damage was caused to the environment due to the leak and only close to ten barrels of oil was discovered in the basement of the pump.

The Alaska pipeline has been a victim of repeated spills and leaks for the last many years. The biggest was in 2006 when corroded feeder pipelines caused more than 26,000 gallons of oil to spill on the North Slope. BP had to pay $26 million in that case too

The leak and resultant shutdown, however, could be another blow to the reputation and income of BP which is still trying to recover from the aftermath of the underwater blowout in its rig in the gulf.

The engineers were however not sure about the exact time it would take to restore the pressure in the pipeline.

BP plagued with mishaps
11 lives were lost and millions of gallons of crude oil flowed into the sea in the recent underwater explosion at one of its rigs in the Gulf of Mexico. BP is expected to pay nearly $40 million as clean up costs.

The Alaska pipeline has been a victim of repeated spills and leaks for the last many years. The biggest was in 2006 when corroded feeder pipelines caused more than 26,000 gallons of oil to spill on the North Slope. BP had to pay $26 million in that case too.

The North Slope oil field is vital as it still produces nearly three percent of the total oil consumed in America. It is also an important income source for BP.

Pump Stations vital for operations
Pump Station 1 is one out of more than a dozen stations which help generate and sustain the required pressure in the pipeline.

The oil is pushed down to the port of Valdez from where tankers transport it to 48 States.

The last time the pipe line was closed was in May last year when another pump station faced a spill from storage tank due to power outage.

Experts say that any rise in oil prices will be temporary if the supply is restored quickly.

“We don’t believe the news as it stands is enough to push crude oil over $100 barrier. If production is reduced to 5 percent until March or April, then we’ll change our mind,” The Schork report said.