Wednesday, August 31, 2005
Hurricane Katrina’s Sobering Math
Typically, car tanks are about one-quarter full. If buyers start keeping car tanks three-quarters full, the added demand would quickly drain the entire system of gasoline supplies.—Today’s WSJ
Shortly after I got my driver’s license—this is ancient history—an event occurred across the globe that severely altered world economies but made my own myopic world a little brighter.
This was the Arab Oil Embargo, which quickly triggered long lines at those gasoline stations fortunate enough to get their share of supply.
What made my own myopic world a little brighter was the fact that, being a teenager with a new driver’s license, and having the endless spare time that teenage boys seem to have, my job was to find the gas stations with the gasoline, and fill up the wagon or the sedan—whichever was running low.
That meant, ironically, lots of driving around after school, and, then, lots of time sitting in a car listening to WNEW-FM, the New York City radio station that used to play actual music based on the actual whim of the disk jockey [see previous discussions of the inevitability of satellite radio in earlier posts]—neither a bad thing from my teenage point of view.
Having a father who worked for a Big Oil Company—the target of choice for Politicians With No Good Ideas of Their Own as well as Angry Consumers Who Never Conserved in Their Lives—I understood that the problem with the Arab Oil Embargo was not so much the embargo itself, but the consumer reaction to that embargo.
Consumers, fearing a shortage, reacted by hoarding gasoline. That, in and of itself, created the shortage of gasoline that otherwise would have been no true shortage at all, as I heard night after night while my father hurled invectives at Geraldo Rivera, then a cub TV reporter, who would show film of oil tankers waiting off the New York Coast “for prices to go up.”
“They’re waiting to unload, you moron!” my father would yell at the TV. It did no good, of course—this was in the pre-blogging days, when the Mainstream Media could say pretty much whatever it wanted without being corrected.
In time, the hoarding mentality dissipated and supplies became plentiful as demand responded to higher prices by going down, and soon my temporary job disappeared, as did Geraldo’s.
Yet today’s Wall Street Journal coverage of the aftermath of Hurricane Katrina took me back to that summer, and, I think, offers a sobering analysis of the situation we face today, in light of the tragedy—both human and economic—left behind in her wake:
If the U.S. auto fleet of 220 million vehicles went up to three-quarters of a tank—or, say, 10 gallons more—it would be an additional 2.2 billion gallons of demand.
Any figure with a “billion” in it sounds large, and in comparison to available inventory of gasoline, 2.2 billion is very large...
Gasoline inventories were 195 million barrels on Aug. 19, and diesel an additional 77 million barrels, according to the latest government data, or a total of 8.19 billion gallons [of gasoline] and 3.23 billion gallons [of diesel], respectively.
Of the 8.19 billion gallons of gasoline in inventory, much of that is not available—being part of the normal stock throughout the supply chain—refinery holding tanks, pipelines, bulk plants, barges and service station tanks.
Consequently, should the American consumer decide to top off the old Hummer, the supply chain could get strained very quickly.
Let’s hope the oil industry gets those refineries back up and running quickly. I guarantee the so-called villains at Big Oil will do everything humanly possible to get it done.
I Am Not Making This Up
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Posted by Jeff Matthews at 9:16 AM