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LONDON (Reuters) - Oil prices fell by more than a dollar on Friday as the West's energy watchdog prepared to tap emergency reserves to help ease a fuel crisis threatening the United States. As the world's biggest consumer runs short of gasoline, President George W. Bush asked the International Energy Agency to release petrol reserves and urged Americans to conserve fuel. The Paris-based agency, coordinator of emergency reserves for 26 OECD countries, may decide soon to release up to two million barrels per day (bpd) of fuel from Europe. U.S. crude oil fell $1.90 to settle at $67.57 a barrel on Friday, having hit an all-time high of $70.85 on Tuesday. London Brent crude was down $1.15 to $66.57 a barrel. Hurricane Katrina killed thousands and knocked out U.S. rigs and refiners when it ripped through the Gulf of Mexico earlier this week. Oil prices soared to levels not seen in real terms since 1980, the year after the Iranian revolution. European allies sprang to the rescue. Germany and Spain said they would back the IEA if it asked them to dip into stocks. German Chancellor Gerhard Schroeder said a release of two million bpd for 30 days was under consideration. It would take at least 10 days for European gasoline to reach the United States once a decision is taken. Europe has already booked up to 30 cargoes of petrol to move to the United States, prompting brokers to warn of an impending shortage. The Paris-based IEA says it is still consulting members and awaiting a report on the extent of Katrina's damage to U.S. Gulf refiners before deciding on a stock release. The IEA last ordered an emergency release in January 1991 as a U.S.-led coalition ejected invading Iraqi troops from Kuwait. Gasoline prices, which have led the market's gains on fears that already low stockpiles would be squeezed severely, traded 17.95 cents lower at $2.2295 a gallon. Washington loaned out emergency crude supplies, eased environmental regulations on motor fuels and waived a shipping law to allow better flow of oil into the Gulf region, where most oil output and eight refineries were idled for a fifth day. Some regional pipelines also started pumping supplies around the country and power was restored to a number of plants. But the U.S. government said it might take months to recover from the killer storm, which struck at the heart of an industry already running nearly flat-out to satisfy two years of exceptionally strong demand growth around the world. Gasoline Crisis President George W. Bush warned retailers about price gouging as New Orleans and the Gulf Coast struggled to recover from one of the nation's most savage storms. Soaring gasoline prices -- up more than 20 percent from just a week ago -- have attracted dozens of gasoline cargoes from Europe but most of those supplies will not arrive until October, leaving open the prospect of a month-long supply squeeze. Canada's oil companies could defer autumn maintenance at refineries to maximize gasoline exports south of the border. Gasoline supply fears have overshadowed the loss of nearly all Gulf of Mexico crude production, a quarter of the nation's total, which is more easily compensated with robust commercial stockpiles, strategic inventories or additional OPEC output. ___________________________ What's the outlook for prices at the pump? Click here. Click here for CNN/Money's special report 'Oil Crunch 2005'.
Gas prices have shot up to over $3.50 per gallon, late Thursday morning  in the Northeast US. People are rushing to fill their tanks as some stations are reporting shortages of gasoline, and many oil wells were forced to shut down after Hurricane Katrina.

Meanwhile, gas prices dropped elsewhere and rose elsewhere.  Saturday morning California had the highest reported price at GasPriceWatch.com.  Another price service reported $3.05 as the U.S. average.

The federal government's weekly petroleum price summary reported U.S. average retail price for regular gasoline decreased by 0.2 cent to 261.0 cents per gallon.  But supply shocks are likely as the distribution systems respond to bottlenecks. On Tuesday, August 30, CNN reported the price of U.S. crude oil rose to a record high $70.85 a barrel. However, prices fell $3.28 to $67.57 a barrel on Friday. In contrast, the crude oil in Europe, which is usually more expensive than US oil, was actually cheaper than in America; as London Brent Crude oil was down $1.15 to $66.57 a barrel. But as CNN reports, "European allies sprang to the rescue."