Friday, September 26, 2008

Running on empty? Here's a good explanation

From the Christian Science Monitor- Post-Ike gas shortage may take weeks to end:
Getting supplies back on track has been made more difficult by more perennial problems – a shortage of regional refineries, an energy policy that demands nearly 200 boutique fuels to meet air quality standards, and a tangled middleman distribution system of gasoline "jobbers" seen as a weak link in the government's ability to control the economy's critical fuel link.

"The whole situation does point up the need for additional refining capacity in the country," says Ray Perryman, a Waco, Tex.-based energy economist, in an e-mail. "Even in a time of moderating demand, we do not have the ability to overcome even the interruptions that are inevitable. I am not sure I would call the frailties new, but they have certainly been brought into sharp focus."
There are still 15 refineries in the Gulf that are not at full production – with six not yet operating at all in the Port Arthur and Texas City area of Texas – mainly due to extended power outages in the wake of hurricane Ike. The Colonial Pipeline, which makes a deep arc from the Gulf, through the South, and up into New York, is running far from capacity, and dealers are anxiously awaiting supplies that run only at 5 miles per hour through the pipeline.
"These boutique fuel requirements that are legislated in so many states are counterproductive at times like this," says Mr. Laskoski. "It would also reduce costs if you could create more of a commodity item rather than a specialty item."

On Tuesday, 20 tanker ships full of gasoline refined in Europe were diverted from the Atlantic Coast to the Gulf in order to bolster supplies.
But Mr. Baen, the UNT industry expert, says tough stances on price gouging may have exacerbated the shortage as jobbers focused on getting gas to areas that were easier – and cheaper – to reach. Without financial incentive to get to outlying areas, those pumps simply remained dry.

That's what seems to have happened in the mountain city of Asheville, N.C. With many independent dealers and jobbers facing long distances over steep grades, distributors with limited supplies chose their routes based on what was expedient – and profitable.

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