The booming economies of China and India are often credited with vacuuming up the world's oil, though American motorists are still high on any petroleum producer's list of best customers, with the run-up in pump prices hardly having made a dent in the summer driving season. As demand has surged, supply has not kept pace (hence higher prices), largely because not enough extra production and refining facilities have come online. That gap makes the market especially sensitive to any loss of supply, even the relatively modest 400,000 barrels a day that came from Prudhoe Bay.
OPEC, the energy cartel that supplies a quarter of the oil consumed in the U.S., said it will sell more to make up for the Alaska shortfall, and the Department of Energy is figuring out if the government should tap its strategic reserves, which would start to kick in within a day or two. But those promises did little to allay oil traders, who frantically anticipate other potential supply disruptions in geopolitically strained locales from Nigeria to Venezuela to Iran. "We have problems all over the place," says Phil Flynn, senior market analyst and vice president at Alaron Trading in Chicago. "What happens when we have the next outage?"
The issues with Prudhoe's pipes are not new: a leak in March prompted the US Department of Transportation to order BP to improve its corrosion inspections. Nonetheless, Alaska's oilfields far from war in the Middle East and hurricanes in the Gulf of Mexico seemed slightly sheltered from turmoil. No more. "It's turning out to be bigger than people thought," says Flynn. "It reminds us how thin the line is between supply and demand."