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Gasoline Shortages: Our Inventory Problem
Posted by Gail the Actuary on September 29, 2008 - 10:31am
I am writing this article from Atlanta, one of the places hardest hit by gasoline shortages. A person can drive for miles without finding an open gas station.
One of the major reasons for gas shortages is that fact that inventories were not very high going into the hurricanes. Then when not one, but two, hurricanes hit, inventories dropped to the level where there wasn't enough to go around. (In fact, the shortages started even before the second hurricane hit.) How could this happen? Isn't there anyone who cares about gasoline inventories?
We hear a lot about the strategic petroleum reserve and its intended role in preventing shortages. Yet when there have been gasoline shortages, in 2005 and this year, the problem was that refineries were out of commission for long periods of time--almost a month at this point in time. Getting more crude oil wouldn't really solve the problem. What we really needed was more gasoline in inventory, so we had some on hand, when the need arose.
Figure 2 shows a graph of the estimated impact of refinery shutdowns, start ups, and reduced runs, following this year's hurricanes, based on Department of Energy data. The amount is really huge in relationship to the total amount we refine.
At this point, I estimate that there is a shortfall of more than 2 million barrels a day of refining capacity--more than 10% of US total, nearly a month after Hurricane Gustav hit.
In the American Petroleum Institute's bloggers phone call last week, (here or here), I asked (at 22:13) Red Cavaney, President and CEO of API, if higher gasoline inventories weren't key to preventing shortages. These are excerpts from his response, together with some of my thoughts:
By all means, inventories are obviously key to being able to have the flexibility needed to ensure that all the outlets that need to have gasoline have got it.
My thought: Red agrees that me that large enough inventories are key.
Our big problem, Gail, is that when you get two back-to-back hurricanes that are this close together chronologically, and given extended startup time it takes to bring refineries back on stream, and the fact that hurricanes are notoriously known for at the last minute adjusting their paths. . . So it is a challenge – much, much more difficult than if you just have one come through and you can start to move off and work can handle as you would.
My thought: Right. Except this happened in 2005 as well (Hurricane Katrina and Rita). At some point, it would seem like we would start catching on that this can happen.
. . . when people are concerned about getting enough, everybody tops off and you all know what that means. That means even if we had sufficient gasoline, you know, people would still have to stand in line.
My thought: We hear this in every newspaper article. In Atlanta, lines are so long at the occasional gas station that is open that I doubt that topping off is a major issue at this point. Anyone who is going to drive 10 miles and wait in line for an hour to top off their tank is pretty persistent. The are a lot more issues with people just plain running out of gas before they can find it.
Of course, after people are burned this time, they will be more cautious. If there is another hurricane, people are likely to plan ahead better. And once there are finally adequate supplies, they may be more cautious about letting their tanks run low.
We were low, but you have got to remember we were low because demand was falling pretty much to unprecedented levels here in recent amounts of time.
My thought: If the industry is selling 2% or 3% less gasoline, it theoretically needs 2% or 3% less inventory, but I don't think that is what Red meant.
If you look at the data underlying Figure 4, you discover that the big drop in product supplied has come in products other than gasoline. These are the products whose price has risen most (think diesel). As a result, people are using less of these products whose prices have risen. But these aren't the products whose inventories have dropped.
The product whose inventory was low was gasoline, but it had only a relatively small drop in supply. I think that what Red meant was the profit margin that refiners could make was low, because the retail price of gasoline was too low, relative to the cost of making it. There are several reasons this seems to be happening. One of them is that world demand is now greater for diesel, and the world market is willing to pay a higher price for it. Another reason is that Europe has leftover gasoline, and is willing to sell it on the world market at a fairly inexpensive price. Another reason is that the ethanol is cutting into the need for gasoline. Yet another is that there seems to be too much refining capacity geared toward light crude oil. I discuss these issues in the article Why isn't the cost of gasoline even higher?
It is not very comforting to think that the level of our inventories depend on how much gasoline Europe decides to use, or how much ethanol is produced.
And at the time you would have had to start building inventory, you couldn’t have predicted that you were going to have hurricanes to the extent that you did. The last two years, we didn’t have any hurricanes to speak of that really significantly bothered production.
My thought: It sounds like the industry doesn't worry about gray swans. There really is no overall industry plan regarding inventory levels, so one shouldn't be surprised if no one plans at the 1 in 100 level or 1 in 50 level. This is not a government program. The total inventory is just the aggregation of the amounts various producers choose to have on hand.
But it costs to keep inventory. . . It is a commodity business. And every decision has an impact in terms of balancing off the customer service and the cost and the return to shareholders.
My thought: This is really the issue. Now that inventory is expensive and profit margins are under pressure, no one wants to pay the cost of keeping adequate inventory. A related issue is credit problems, which Red addressed later in the call, at 57:54.
And what most people don’t understand – I used to be a banker in one of my former lives – what most people don’t understand is our economy runs on credit. All the way from people who make most of their purchases on credit cards, to small businesses who usually get a line of credit to help them get the materials in to sell to people who are out running businesses like those that are out, particularly onshore. And got a couple of rig crews that are out there that he’s got to pay before the stuff comes in. They are all on credit.
What has happened is basically, the commercial credit market, or commercial paper has pretty much – (inaudible) – by some of the actions that are being proposed, which has forced those borrowers into limited amounts of capital. And if you are hearing from all parts of the sector now, the strain of not being able to get access to the amount of borrowing that they usually have, and that’s why there is a sense of urgency on getting this matter resolved. Because if you don’t open up the floodgates and the flexibility and take some of the bad stuff out of the system, you’re not going to free up lending to the extent that you need it. So it may not be with everybody out in the oil field, but today’s problems that they are all feeling, but if this thing were to go on for a couple more weeks where we’re starting to dry up, I can see a big impact.
My thought: Most people would like to think that the oil and gas business is unaffected by today's credit problems. This is clearly not the case. If we cannot fix the US credit problems (and it is not clear to me that we can), these credit problems are likely to spill over into things we take for granted, like gasoline production and inventories.
Going Forward
It seems to me that there ought to be a more satisfactory way of determining gasoline inventories than depending on how much inventory each producer chooses to keep, based on his current credit situation and how tight profit margins are. At one point, we had integrated oil companies that owned the whole system from top to bottom. When this was the case, they had a strong incentive to keep all the pieces working together. Now, the process is divided among a number of players. The process depends heavily on price signals, but these haven't been working as one might hope. The credit situation is adding another dimension. We should theoretically have a government mandated minimum gasoline reserve, but I doubt this will happen.
I tried to do a little modeling of where we are now. It looks to me as though we should be able to get inventories back up over 180 million barrels by October 17, if refinery availability keeps coming back on line, and if we can increase our gasoline imports from Europe to 1.5 million barrels a day. At such a level, the problem with long lines and stations without gasoline should mostly disappear, I would think.
I wonder, though, whether this will happen on schedule. Our prices don't seem to be high enough to encourage large gasoline imports from Europe, and it is not clear our credit problems will go away. It is possible we may find ourselves struggling with the inventory issue long after it should have been resolved.
Links to recent articles related to gasoline shortages:
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This is happening in an area of the country that has long been a Republican free market ideology stronghold. Why plan for hurricanes when the invisible hand will provide if we just let the free market work? Only problem is that when push comes to shove and the invisible hand demands the doubling or more of prices to bring in supply, politics calls it price gouging and stops it.
One would think that there would be a political price to pay for this mess, especially with the election only forty days away. But faith can make people blind to the situation in which they find themselves. The cognitive dissonance that they have been wrong is too much to bear. Denial will reign and the true believers will be re-elected.
Meanwhile here in the upper Midwest gas prices dropped to $3.20 at the local Walmart. The stories of gas shortages in the Southeast seem as unreal as reports of food shortages in Haiti. E85 is widely available and sells for about $2.50.
Yeah, it's really strange that Georgia is experiencing those shortages. And, Charlotte, NC and Nashville, TN, etc. It couldn't be that it has anything to do with the fact that we are in a political year. Just because McCain is running on the "Drill, Drill, Drill" ticket, would the oil companies be so crass as to add a bit of emphasis to the message? I mean, Mr. Obama has even stopped campaigning in Georgia, all but admitting that Georgia is so Red that he likely would have no chance there.
The funny thing is that there's gas in my county at the northwestern corner of NC. I filled up last evening, being the only car in the station and It cost me $3.86 a gallon, while the price near to town was $3.99. And, I spoke with a friend last evening who had just returned from a trip to Florida, driving up I-95 then thru Charlotte. Apparently, people have stayed home and thus the shortage may be localized to some degree. Still, the fun will begin again tomorrow as people start to head in for work.
E. Swanson
Free-market-magic believers have learned that the simplest message repeated endlessly will be believed, whereas a more complicated one just befuddles the masses. So if you repeat "drill" over and over (that's why the chant comes in groups of threes), you'll be believed. Consequently, someone needs to find a way to fit hurricanspipelinesdistributionbottlenecksrefineryshortagessogetreal into a chant, or maybe a neat little jingle!
There's a brand new word for such adamantly 'positive' believers:
It's called Wishery.
It's Reality the Way We Wish It Would Be.
I hear Jiminy Cricket loves it. He might even dump the 'when you wish upon a star' soundbite for it.
It's a word Bush would gravitate to.
Don't ever misunderestimate the power of positive thought.
I guess I don't get the no-inventory idea. Here in Minneapolis gas has been falling in price like crazy, down about $0.50 past week. $3.39 today.
This acts more like a regional transport problem.
We have 2 refineries in the metro area.
Part of this depends upon where you are on the food chain....
In Chapel Hill, NC, three of the four gas stations on NC-86 heading toward I-40 have been without gas since Saturday (well, one load got to one station on Saturday afternnon). If you go 20 miles to Mebane on I-85/I-40 they have gas at $3.61-3.69 and they are doing a brisk business. I pumped 12 gallons into my tank on Saturday, the first time I've pumped any gas in 22 days.
Across the street from where I work, they are running out of gas about 1-2 times per week.
So, it's spotty and yet commonplace in central NC. Same is true in Greensboro and it's right on the pipeline.
Someone please correct me, but if the price were allowed to rise to the clearing price, wouldn't it then be high enough to induce tankers to haul the gas from areas where gas is plentiful?
I would believe so. It was stated by one of the fuel transport companies it has never been economical for them to get gas from Charleston SC when Asheville NC had shortages. I think the Charleston SC depot is from seaborne delivery.
I guess if there was enough gas to get by tankers, it would be transported by pipelines anyway, until they are full. But I am not very informed about that crisis, so I may easily be wrong.
What has been missed on this thread is the statement by Red Cavaney about the shutting down of credit. Out here in the Permian Basin, a lot of oilfield service companies are on a cash only basis with their fuel supplier. Some of these companies have $100K week fuel bills. The largest expense is labor. These companies payroll comes due every week. These companies churn a lot of money. But the oil companies keep them 60-90 days behind so they have to borrow against their lines of credit for weekly payroll.
Same for the fuel distributors. They buy from Alon or Navajo and if they cannot get the credit from their bank, then it is cash up front. What Red Cavaney is worried about is these companies not being able to get credit and meet their payroll.
THe oil producers are completly dependent on contractors to provide almost all the services to the industry. IF the contractors cannot meet payroll, no one shows up to work and the oil business slowly grinds to a halt. The refinery's are not set up to extend credit to the retail gas stations, so the gas station cannot buy fuel as they do not have the $42K credit for a tanker load of gasoline.
The supply of feedstock starts drying up and the refiners cannot sell to their distributers because the retail distributer cannot buy the refined product.
Not exactly peak oil. A lot more scary because this may not happen slowly, it could happen before the end of October.
Interesting diary over at Daily KOS that has a video of one of the gas lines. It was taken by a guy on his bike (you can see his shadow at one point). Worth a look.
Long line at Quik Trip in Atlanta - YouTube video
There are only 92 cars in that line. Sure, it's about half a mile long, but 92 cars isn't really that many. Is it?
I know people have had a problem with waiting in a line forever, and then having the gasoline at the station run out before they could get any. I don't know how much gasoline a station would start with.
I didn't count but you're right, 92 wouldn't be that bad for a station that looks to have 20 places to fill up at. Of course, that doesn't tell you how long they've been waiting or are going to have to wait. Plus it implies that there's nowhere else nearby to go to instead
92 cars isn't much if you are at the front of the line, if your in the back 92 cars is probably enough to let you run out of gas if you were on "E" when you got in the que. Especially if they only have one grade of gasoline and are only pumping on a few pumps.
My brother gassed up at a QuickTrip with 4 pumps per island and 6 islands, they were only serving gas from 1/2 of those pumps and that is after he sat there and watched the tanker truck fill the tank. It was 3 am and there was a car at every pump waiting.
Not pretty, seems like in a multi-state shortage, the feds would get involved? At least institute rationing to restore some semblance of order.
Looks like I'll be getting the bicycle in shape,they're shouldn't be too many cars to dodge on the streets by the end of the week. Wish I had a bike path, I like my job, but I don't want to die for it.
If US cars were fitted with the (still rare) European system where the engine is automatically cut when the car is stationary, and starts again as soon as the gas pedal is pressed, running out whilst queueing is not likely in a 92 car queue.
"but 92 cars isn't really that many. Is it?"
Only if your time is worth nothing and you have absolutely nothing better to do with it.
Quite probably the case for most people that spend excessive time commuting each day.
They calculate the lower mortgages vs. the financial costs of commuting (gas, car wear & tear), but allocate zero for the extra time wasted in the longer commutes. So they value their own time at zero.
Alan
When I ask most people this question, or something similar, they usually reply that they don't mind the commute because it gives them some down time to not have to focus on anything. I myself usually let my brain wander in this way while I'm listening to my ipod in my walk to work, 30 mins. each way, so I can understand where they're coming from.
I'm also in midtown atlanta and to tell you the truth, other than a few weekends ago when I drove up to the Smokies I haven't noticed any shortage, but that's because I haven't driven my car in that time. I was surprised to see such a long line for that gas station in the video. I am in walking distance to work and just about every type of store you might need except for a department store (e.g., I hit the grocery store on the way home some days). There's one of those I could walk to if pressed or I could take the Marta out to one of the malls in the suburbs that it stops near.
Times like this I don't mind making the decision I did to live in town, but it's definitely a trade off because of the higher crime rate and other annoyances of living in the city.
Alan, I don't totally buy that. As you know quite a few people moved to the North Shore because they value the future of their children's education and cannot afford private schools in New Orleans. They also believe that living on the North Shore is safer, has lower taxes, cheaper cost of living, and less corruption. The trade off is a longer commute, higher gasoline cost, and a faster depreciating car. Many people place a high value on the education of their children as well as their personal safety and general living conditions. You of all people should know that. There is a tendency of The Drum posters to demean the average Joe or Jane as clueless; as someone who spend nearly his entire life as a small business man I'll tell you it isn't necessarily so and I don't think you really believe that the time they are sacrificing has a value of zero.
The State of Louisiana built the world's longest bridge just to support Exurban Sprawl on the North Shore (24 miles of bridge plus miles on either end) and to take away the tax base from New Orleans (schools deteriorated after this State of Louisiana "investment").
Earlier, I saw a Jefferson Parish promotional video from early or mid-1950s. Not ONE black person on camera in Jeff Parish and they cheerfully noted that "You can use your VA loan on a new home in Jefferson Parish but not to buy an old home in New Orleans".
You confuse "cause" with "effect".
Post-Katrina, New Orleans schools are definitely improving. I am seven blocks away from what will likely become the best public school in the USA. The Republic of France helps provide native French speaking teachers for all classes but English and Geography (students should learn that Deutschland is called Germany and not Allemagne) and the school is run as a "better" French public school.
Best Hopes for 1950 to 1970 in reverse,
Alan
"New Orleans schools are definitely improving." Yes they are, maybe in 12 years they may catch up with the schools on the North Shore. How many kids in public schools in New Orleans? How many kids are in what may be the best school in the USA? Alan, New Orleans schools are still the worst schools in the state and for a lot of parents that alone is still a good reason to get the Hell out and commute. The migration out of Baton Rouge to Zachary is for the same reason. Baton Rouge schools suck, too and nobody built a bridge to lure them away.
It may, more often than not, be cheaper to live in a city, but if that city was New Orleans, for many years it wasn't safer than commuting. For years New Orleans was right up there with the highest murders per unit of population. I have a hunch if you add the accident rates + murder rate for New Orleans and compare those sames rates with Mandeville, Covington, and the Bridge area commuting wasn't all that scary.
Finally, I understand that it makes sense if the vast majority of people lived in cities, from the peak oil perspective, it would be better. However, for large numbers of people the amount spent on gasoline is not critical and simple life style adjustments and making sure the next car is more fuel efficient will keep many in the burbs for years to come.
I would highly recommend Robert Self's "American Babylon" which describes in detail how this same process took place in the Bay Area. Suburban bliss and urban decay became self-fulfilling prophecies as a result of a coordinated program by developers, governemnt at all levels,and the real estate industry to deprive the cities of resources and transfer them to the exurbs. probably the best social science book I have ever read,
Matt
you really believe that the time they are sacrificing has a value of zero
I use the words of long distance commuters. Not once have I heard an allusion to the value of their time spent commuting. Any negative on driving an hour+/day is put in terms of quality of life terms (if at all), not in economic terms.
They also rarely mention safety and the increased death and disability rate that goes with increased driving. 40,000 dead plus hundreds of thousands of life altering injuries each and every year is just ignored as well.
In the real world, Exurbs and Suburbs are more dangerous.
Alan
When I was a kid growing up my father drove 20,000 miles per year. He supervised a succession of construction projects that were always 40-50-60 miles in some direction or other. Rather than move us around every couple of years he sacrificed for us by driving long hours.
There are lots of reasons why people drive long distances. They obviously do not think all that driving has no value or else they wouldn't do it.
One last comment. Your "less corruption" remark is dated. Jeff Parish is certainly more corrupt than Orleans today, and St. Tammany (North Shore) is sliding.
This Saturday we are voting on a Charter Amendment in Orleans Parish that devotes 0.7% of General Revenues to the Office of Inspector General, removing that budget leverage over a diligent Inspector General. New Orleans will be the first major city to take this step.
The City has recently hired a bull dog for Inspector General with a multi-million dollar budget.
Best Hopes for Less Corruption (at least in Orleans),
Alan
I agree with puhkawn that people view longer commutes as a tradeoff for perceived benefits. Europeans are often seen as more virtuous because they live in smaller homes with less sprawl, but the fact is when they move to the USA they fit right in by buying huge cars to drive long distances to their huge homes with huge lawns.
Regarding better living conditions and personal safety -- I think most of us are aware of the stats showing people with long commutes have a equivalent or even higher fatality rate than those living in the inner city.
Furthermore, there's an psychological effect where the contentment that comes from living in a large home wears off fairly quickly, so that the relative happiness of the large home dweller and small home dweller is about the same if all other things are constant. Since things aren't constant -- the exurban dweller still has the long commute -- the long commuter has traded off his time for essentially nothing of value. We trade our long commute time for nothing of value, so our time is worth zero.
I'm not familiar with stats that show that people with long commutes die more often than those who live in inner cities. I think for some inner cities that is unlikely to be the case.
But the commuter is often trying to protect other people (wife and kids) and to allow them to go out at night, not hear gun shots, attend a decent school, not live in high fear of rape, not come home to a burgled dwelling. There are lots of reasons why people do long commutes. They aren't just being lovers of cars and lovers of fossil fuels consumption.
People who face different trade-offs and different risk equations like to look down on the exurban commuters. But when I hear them do it I just think "snob".
I agree.
I used to work in NYC. The coworker who was partnered with me lived in a pretty bad neighborhood. When I went to his apartment to pick him up, people would be selling drugs in broad daylight, throwing the bags right over the street.
He eventually moved to the suburbs in New Jersey. He was really shocked at how much driving was required. In the city, there were stores on every block, so you didn't have to drive. The kids walked to school or took public transportation, and there were dance studios, music classes, etc., on every block, so they could go to after school activities without even crossing the street. In the 'burbs, he or his wife had to drive the kids everywhere they went. They really never expected that.
However, they never considered moving back. At least no one put bullets in their bedroom wall in the suburbs. (Yes, that really happened to them in the city. Someone in the next apartment got angry about something or another, and fired his gun at the wall behind their bed. While they were sleeping in it. I think that's when he decided they had to move.)
Driving everywhere is perceived as riskless, an annoyance at worst. Despite the 40,000 annual deaths and several times that many "life altering injuries". Despite the increased obesity and reduced routine cardiovascular exercise, driving in Suburbia is seen as "safer".
I very much doubt that perception.
Alan
I think what you're missing is control. Or at least the illusion of it.
I think that's a big reason why so many people are nervous about flying, even though it's statistically safer than driving. In the car, they're in control. In a plane, they aren't (unless they're the pilot).
They may be fooling themselves. (90% of people think they're better than average drivers.) But you can do a lot to increase your safety on the road. If you make an effort, you can be slender and fit, even if you live in the suburbs. But things like bullets going through your bedroom while you're asleep - it seems totally outside your control, and that's the kind of thing that freaks people out.
I agree.
It has been two years since a scheduled US domestic jet flight had a fatal accident (Comair in Lexington KY August 2006). A REMARKABLE feat !
An average flight is 100s (1000s ?) of times safer than driving. Statistically, more people die driving to the airport than they do flying today (although one serious runway collision would change that).
Control, or the illusion of control, matters more than the statistics.
Alan
If you make an effort, you can be slender and fit
Bicycling to work increases lifespan by 12.4 years, absent accidents. With accidents, the increased lifespan drops to 10.6 years (my link is now dead).
Accidents can be decreased by increasing the # of those cycling. Double the # of cyclists on the road and reduce the accident rate by 1/3rd.
http://blog.wired.com/cars/2008/09/for-bikers-ther.html
http://www.science.unsw.edu.au/news/a-virtuous-cycle-safety-in-numbers-f...
By inference, quadruple the # of cyclists, cut the accident rate by half and the lifespan of bicycle commuters increases by 11.5 years. A VERY considerable benefit.
Best Hopes for walking and Bicycling,
Alan
I'm willing to be convinced that it is safer to live in NO than to commute to it. But I'm not willing to accept someone's gut guess.
Look, you have to take that 40k deaths in vehicles and separate various reasons people drive, their age, sex, type of car, time of day, whether they drink or use drugs, and other factors.
You also have to consider that people do not all like to live in cities for lots of reasons. You want them to have your values. They don't. Get over it.
Likewise, the primary risk factor for violence in New Orleans is whether you sell illegal drugs. Secondary factors are whether you buy illegal drugs, or live with someone that sells drugs. Tertiary factor (and hardest to avoid) is being on the periphery of those that use drugs.
A few murders each year by jealous spouses (reduce risk by not cheating), or the mentally ill, etc.
Quite frankly, I fear drunk Texans driving more than "street violence".
As for "adopting my values" we do not have the energy to continue to support the non-negotiable "American Way of Life".
And the Suburbanites stubborn clinging to it will destroy the economy and the environment for all of us. I advocate zero governmental forces to preserve Suburbia. We should reverse the gov't policies that subsidized Suburbia and destroyed cities and enact new policies that subsidize cities and destroy suburbs (turn about is fair play).
Alan
Chronic disease is completely caused by diet, although of course exercise is important too. But a person can be a very lazy low-fat vegan starch eater and will have much greater health for much longer than a fitness nut who eats animal products.
http://veganmaster.blogspot.com/2008/07/you-are-biological-herbivore.html
Consider that three weeks ago, seeing three cars in line would cause someone to drive to another station, I'd say that 92 is plenty.
That's how it is here - more than three cars? Keep driving. Not worth the time.
Not a single Prius in that lineup... but I did see two hummers. I wonder how much fuel was consumed by all those idling gas hogs?
One of the CNN anchors expressed a similar sentiment. I guess he's been having trouble finding gas to get to work. They had a reporter at a gas station in Atlanta, and when the anchor saw a Hummer behind her, he started complaining. "Get that out of there! They shouldn't be allowed."
I bet the person in the white Hummer is re-evaluating their life choices! Especially if that station is only allowing a few gallons/customer.
There are two hummers actually. One at 1:28 (the white one,) and another at 1:37 (black.)
What is sad though, compared to a lot of the other cars, they don't actually look that big...
I watched this video. (Thank you for the link.)
I haven't been back to the States for a visit for almost 4 years and seeing this video I really thought "Wow! Those are huge cars! Are people really cutting down on gas?" Here near Tokyo most cars are tiny now. Wow, just wow the way Americans use gasoline. I really had forgotten what it was like.
Gas stations are also much smaller here. Gas prices are much higher too! (about 160yen/liter ($6/gallon).
I liked those lines in the song that went with the video: "breakdown", "I give up" etc. Very dark ironical humor there. I'm sure very needed at this point!!
It can also get violent too. Some guy yesterday was complaining that he wanted to go in the gas station buy cigarettes; however when trying to push trough the line, some other man blocked him and started shouting. "I think he was about to take out his gun. I bet half of them carry one in the back of their trucks", that's what he said.
Having lived in parts of the world where the gas price is much higher than the US I have observed the following: People behave much the same when gas is $7-9/gallon as they do when it's $3/gallon, or even $1/gallon. Because what people soon discover, either consciously or unconsciously, is that the amount of money they spend on fuel is a very small part of the cost of owning a car, not to mention how small a part it is of their disposable income. Now I'm not saying this is true for everyone, obviously some people change their lifestyle in response, but the overall structure of society ends up looking the same. If there's a 'tipping point' for gas price, nobody's found it yet.
What gets people's attention is a high rate of change. They moan about it, the media covers it, politicians get sound bites out of it. Then when the price stops changing, it drops off the radar and everybody stops talking about it, even if it's now at a much higher level. The fuel protests in England are a perfect example. That happened at something like 80p/liter and now it's well over £1/liter.
A shortage is more in your face and gets your attention in the same way that a power outage does. For a short while you think about how dependent you are on that commodity/service. Then the power comes back on and you forget about it.
I don't agree that people living in countries with expensive gasoline behave the same as people living in countries where it is cheaper. Here in Japan sales of cars are down every year since 1992 (partly because of a sinking population).. Young people especially won't buy a car here. They buy bikes or motorbikes.
Used auto dealerships are going out of business (I live in an area with lots of these).
The "overall" structure of society looks very different!! We have a new train line to Tokyo and lots of people are using it instead of driving.
True and evocative of Milton Freidman's "permanent income" theory for which he won a Nobel. Works better for corporations, because it is rational, but everybody neds planning horizons. When two hurricanes hit twice...ooops.
Rates of change are popping all over these days. As far as peak oil is concerned two predominate: Rates of return and uncertainty. Rates of return have skyrocketed in the market as a whole. You can buy cash flow in established oil companies (among others) at a rate of 50% and even more if they have projects paid for and in the pipeline - literally in the case of oil companies.
"Drill, drill, drill" means companies will need similar rates of return on a risk adjusted basis to get some high-priced offshore turntables moving. They weren't doing it much before. Why should they do it now? Maybe with gov't grants or something...
One thing is certain: The rates of return to pick out a few offshore fields will need to be sky high. Pretty much guaranteed a la OPEC fairways. Hard to do without tax money on the line somehow. As you might ahve guessed from the ads, what industry needs is enormous rates of return, if they can find anything significant.
Now add uncertainty: You can buy Cdn EBITDA at 2X or less with your choice of minerals, manufacturing and oil. Why the heck should anybody take any risks with reduced yields due to EROEI? Watch ARAMCO and their proxy Carlyle move money from KSA into more secure "diversified" proxies in safer areas.
There was no reason for the so called greatest country on earth to run out of gasoline in the southeast part of the country. Hurricanes occur every year. Sorry I am sick of listening to dumb arse republicans say oh let the market work, if you know that during the summer there is a possibility of hurricans shutting in a huge amount of product then you better have supply in STORAGE for at leat a 21 day extra supply. Its a national issue. We have crude in storage. We have leaders that are worthless, we have no people to tell people what to dowhen there is a shortage, Yep raise the price and if that does not work, ration the stuff 10 gallons odd even days until things improve. Liquid transportation fuels are as important as water. Yep no gas no work, no work well guess what dead economy.
Good thread update, Gail.
You mention two "ifs" in your projection -- how likely are European imports to ratchet up? How likely are the refineries to produce at capacity?
Given that we're still dropping right now (I assume), it would seem that it will take quite some time to get back to "normal", although shortages should ameliorate as soon as the production rate eclipses the consumption rate.
I imagine, as a nation, we COULD send gas trucks to the SE as easily as power trucks to Houston, or easier, actually. But that might cause spot shortages elsewhere, and it seems like nobody wants to go through the effort.
Maybe that's another side effect of short credit and JIT business -- nobody has much "give" and they're too busy looking at their own bottom line to consider taking a loss on a truck for a few days, and those that could already sent stuff toward Texas?
I think it will be interesting to watch Haiti and the poorest African nations this year. It may be that there will simply not be enough "help" to go around?
I don't think this is a Republican or Democrat issue, though, any more than the credit fiasco. It's a symptom of a pervasive mindset of computerized efficiency. It used to be than every engineer included margins of errors and safety factors in everything, and most were over-engineered. Now with computers it's easy to optimize, and 99% of the time it works fine, and you save a lot of money. But sometimes a situation comes up outside the design parameters, and you're stuck wishing you had more margin. I imagine the same is true in petro storage and banking as well!
I think there are three problems with sending trucks to Atlanta:
1. We really don't have enough trucks to send much gasoline very long distances by truck.
2. It costs a whole lot more to truck the gasoline in than to send it by pipeline. The anti-gouging statutes don't give retailers enough room to be able to pay the additional cost.
3. There really isn't quite enough gasoline to go around. If we could get the Atlanta /Nashville / Ashville problem fixed, a similar problem would pop up elsewhere.
I keep thinking that the Atlanta problem will start getting better pretty soon, because part of the problem is that we have our own special summer "blend" of gasoline. Last Wednesday, the rules were changed so that we could use other gasoline instead. Now that we can use other gasoline, you would think that other gasoline could be found.
It is possible pipeline transit time is part of the delay. If all gasoline being shipped by pipeline as of last Wednesday already had a purchaser, those purchasing gas for Atlanta use might have to wait for new gasoline to be produced and shipped from Texas or Louisiana. It would take over a week for the new gasoline to arrive, if it only travels at 3 to 5 miles an hour.
Alan or whomever:
Why not ship gas to Atlanta from Midwest via train tankers?
Gasoline is a "Just in Time" product with no inventory stored up.
If we shipped from Midwest to Georgia then Midwest would be short.
I understand that, but with prices falling in MPLS and here in Wisco, it would seem we could bear sharing some of the burden with folks in the south. Alan's post below is a reasonable response and I wonder if any ethanol may be redirected to the SE. I also imagine that there are few "surplus" fuel-grade tankers just sitting around, so again the inventory and condition of rolling stock prohibits actions that may otherwise seem like decent ideas.
All of the tank cars are carrying ethanol (which cannot be shipped via pipeline).
Alan
I believe that they said the high sulfur gasoline wouldn't start arriving until "up to" two weeks from the decision date, so that's next Wednesday.
Gail, are the anti-gouging laws really that rigid?
"The anti-gouging statutes don't give retailers enough room to be able to pay the additional cost."
I would think they should allow for profit tacked on top of whatever the delivered cost is. And it seems like just a price quote taped to the door of the "new" delivered prices should be enough to justify a higher price to pay for the next load.
(but I guess the laws here in Michigan aren't much more sensible - I believe it just says "reasonable" profit, no guidelines such as percentage, etc)
I think the problem is that the penalties are pretty high, and the cost of fighting the allegations is high. I remember one of the old API calls (not sure now which one now) particularly raise this issue. The way the statutes are set up, the retailer is already a loser, if he is only accused of wrongdoing.
Maybe someone in the industry can elaborate, or correct me if I am wrong. It may be that some of this is local, and varies from place to place.
It does vary with locale. It's easy to file a complaint in NC but it may be more difficult to defend (but when you have the invoice that shows the wholesale price and delivery cost, and it's not a faked invoice...case closed). The dealer may also have to show the actual monetary transaction.
IIRC one limit was 115% of prevailing price "before". I doubt that would pay for bringing in a tanker truck all the way from the Midwest and over the mountains. In other places the limit is "unconscionable" or some similar criterion. There can't possibly be enough net margin in a tanker of gas to pay a laywer many hundreds of dollars per hour to debate endlessly about something as vague as that, even if one ultimately "wins" the suit. Far less risky just to be a great citizen (comment 3) and let the pumps go dry.
And therein lies the rub. Better to lose a day's pay than to pay a buck extra for the day's gas, at least according to that guy and the rest of the moronic multitude screaming at their politicians about "gouging" with not the slightest heed of possible consequences. I guess the stupid fools had better have their bicycles ready - whether or not that's a reasonably safe way to make their trips... sigh...
Another excellent post from Gail. I only wish that the post and the comments, some of which are highly informative had spent a little time looking at the big picture issues. The big picture issues are how we use this ever diminishing resource to continue our transportation system. Atlanta is the perfect example of the failing paradigm of continuing to try to keep the happy motoring dream alive. Spot shortages and even not so spot shortages are in our post peak oil future. If you live in a community where the only way to get around is by automobile, you are vulnerable. IMO the Atlanta problem could have been mitigated by some form of rationing such as odd even fillups and repealing the anti gouging statutes which are a form of price fixing. If you fix prices you risk shortages. Allow the market to work and sure you might have $5 or $6 gallon gas for a short while but that kind of price differential would have been strong incentive for new supply to step up to the plate. It would also tend to focus the automobiling public to thinking about a new way of moving people and cargo and cars and trucks are not going to work much longer as the dominant modality. Electrified rail is the obvious logical solution supplemented by buses and perhaps large vans. Once this Southeast only problem starts to spread and the SHTF on a national scale, the American motoring public may finally start to get it. But in the absence of national leadership, they wont. I would like to think that the Atlanta and Nashville crises would have spurred a discussion on the unsustainability of the suburban motoring model but so far it hasn't and I suspect that it will take a full scale national motoring meltdown to occur before we get it. In the meanwhile it is starting to look like the beginning of the next great depression and a lot of those big steel behemoths purchased with home equity loans by people living in distant suburban homes 30% underwater in their mortgage and still sinking will be mailing their keys back to the banks or credit unions.They will have no choice after they lose their jobs or their health. Those suburbans and excursions and hummers and pickups will be a rich source of iron ore which we will need when we finnally start laying track.
I am afraid I can't take an overview approach every time--especially when this is my fourth post on the same general topic since September 15. It is sort of the topic that won't go away.
Regarding the Atlanta situation, it is not at all clear to me that the conventional wisdom regarding Atlanta is correct. In Atlanta, most homes (except for a few townhouses and apartments built in recent years) have their own large lawns. These could be used as gardens to help out with food shortages, so I am not sure they are all bad.
Regarding transportation by trains to various places, it is not clear these would be all that helpful. On a relative basis, very few people want to commute to the center of Atlanta. Jobs in Atlanta are scattered fairly uniformly all over the metro area. If people traded homes with others living closer to their jobs, quite a few would be within walking or biking distance.
I think that a lot of the jobs downtown and in Buckhead are likely to go away, if the financial crisis is resolved with a lot of bankruptcies. This will further reduce the need for commuting to these areas.
If we lose electric power more or less simultaneously with our current level of oil supplies, it seems to me that most very dense cities will be unlivable quickly. Less dense cities like Atlanta may be able to produce a fair amount of their own food, and have local businesses, so may hold together better.
I don't know that I have all the answers to this question. I think that the standard answers presuppose a lot of business as usual thinking (continued electricity, available credit, available imports, jobs centers continuing as in the past). If these things cease, answers based on business as usual thinking will be wrong.
Isolated suburbs (socially as well as physically) "self sufficient" in food and jobs and with only oil based transportation in and out is an unrealistic fantasy IMO.
Large lawns are a liability, they make everything further away and more isolated. And the typical Suburbanite family cannot feed themselves on a typical Suburban lawn. Not even close.
"Rail Suburbs" (see Boston, Philly, Long Island, etc.) do have a chance post-Peak Oil. Railroads are one of (if not the most) durable infrastructure. Highly energy efficient as well in an era of energy scarcity. A walkable community of 10,000 or so, clustered around the local rail station and living off nearby farms (not former farms concreted over and topsoil scraped off) is a decent bet.
http://en.wikipedia.org/wiki/Image:Mbta_district.svg
is an example around Boston
I wanted to talk with you at length in Sacramento but time never allowed that. I do not think that you "get" how rail can make the difference.
Suburban Atlanta is simply not viable "as is", with current transportation, spread-out jobs, low density. It will not last.
Expand MARTA and lighter forms of rail massively, zone for TOD and "natural forces" will result in a much more viable form.
One example I use is a new station (New York Avenue) on an established rail line (Red in DC). The new station resulted in a MASSIVE office building boom next to the station. Transit > jobs. DC had no urban rail in 1970.
Miami is another. A long ignored rail line simply got commitments to expand and it suddenly became the focus of development.
What you see today will not last (and, no, people will not trade homes as you suggest in large #s). Urban Rail is THE best tool to build a viable future.
And Atlanta suburbs seem unlikely to survive either intermittent (much more likely) or no electrical power. They were designed for air conditioning and can turn into lethal sweat boxes without a/c. And the distance (physically and socially) work against collective responses.
In the short black-out during Gustav, a single generator served the needs of roughly 20 people in my neighborhood. Unlikely is most modern suburbs.
Best Hopes for viable Rail Suburbs,
Alan
However, this Rail Suburb concept presumes sufficiently reliable electricity that it is safe to get on a train - after all, they almost instantly turn into "lethal sweat boxes", to use your words, when the power goes out in July, and the Safety Nazis fiercely resist evac'ing electric trains even when the passengers are passing out. It also presumes that it is even worth getting on a train given the potential to be stuck for many hours, possibly under dangerous conditions. (A similar problem exists with elevators in tall dense city cores, a packed unventilated elevator becomes a suffocating sweat box in very little time.)
With all the NIMBYism, political blockages, and "Citizens Utility Boards" squalling in their customary idiotic manner about a few pennies on the monthly bill while not giving one hoot about reliability, that's doing too much presuming for my taste. We'll continue to have electricity, but given this politics alone, even irrespective of primary-energy issues I have no confidence that we'll have electricity reliable enough that I would dream of setting foot in a train in January or July.
Large Suburban Lawns as Farms
Try to take an aerial view of a neighborhood. Physically pace off the distances for, say, one block (measure from the center of the street bounding the block). What % goes to streets of what was once farmland ?
Then measure the area covered by driveways, walkways, and sidewalks (perhaps zero for the last item). How much more concreted ?
And then measure (roughly, the neighbors may not like your pacing off their homes) figure the % under roof (including car ports).
Then subtract unusable ground (for any of several reasons, shady land on the north of buildings, narrow rocky strips, utility easements, etc.).
Now consider what is left. Will trees be cut down (and stumps dug up) or not ?
Did the developer scrap off all the topsoil ? (most likely yes). Has the ground be treated for decades as lawn (worms are the enemy of perfect lawns) with chemicals, etc ?
What is the tilth of the land ? Will vegetables and potatoes grow easily (or even peanuts ?) (Almost certainly no, see suburban developer and lawns).
Is there a natural ecosystem to control crop losses (ladybugs & praying mantis, etc.) ? Likely no (see lawns).
Consider the would be farmers. How many have even put out a dozen tomato plants ? A quarter maybe ? How many know how to raise a wide range of foods, from staples to fruits ?
How many know how to can or otherwise preserve food ? And have the equipment and supplies to do so ? Maybe one, maybe none.
How will these would be Suburban farmers get supplies (fertilizers, rototillers, canning supplies) ? By driving. And how many miles to the nearest source ?
Now compare the above to the operating cotton, soybean or peanut farm (or peach orchard) that the Suburban developer bought out, and just how much food (or fiber) that farm routinely and efficiently produced. A 98% or 99% drop in productivity is a reasonable SWAG.
Alan
You are right. It wouldn't work very well. But it depends what our real alternatives are.
Most of us probably need to be leaving the cities, one way or another. Lots more infrastructure for the cities won't solve this problem.
Most of us probably need to be leaving the cities, one way or another. Lots more infrastructure for the cities won't solve this problem.
HUH !?
Cities provide the biggest "bang for the buck" for efficient use of energy efficient infrastructure. If there are severely limited resources, they are where the "first dollars" should be spent (including electrified inter-city rail).
The alternatives are more Suburban and Exurban sprawl, or masses of agricultural labor (see Grapes of Wrath, but electric trains instead of Model Ts to shuttle them from crop to crop).
Or a mass Die-off.
Suburbia and Exurbia are "dead men walking" today, as currently configured (Boston and a few others possibly excepted).
Highly energy intensive to maintain (police, plumbers, food distribution, road & sewer maintenance, etc.) even if the commuting problem is solved.
"Large Lawn Suburbia" implies an order of magnitude (x10) or even more road surface to maintain/capita than my neighborhood (remember asphalt is just fuel that needs a little upgrading). Many times more feet of water and sewer lines (that require pumping)/capita, and dozens more "hidden" energy uses.
Absent large scale die-off, people will go somewhere.
Not enough "hills" to run to for even a tenth of our 305 million. Post-Peak agriculture could use a LOT more field hands (say 10% or 15% of the population), many of them commuting from crop to crop (labor requirements in ag are NOT constant) by electric train.
The ONLY viable solution for decent (or even semi-decent) quality of life post-Peak Oil is expanding the cities, emptying out much (but not all) of Suburbia and all of Exurbia, and making the cities as energy efficient and productive as possible.
I see all other alternatives quite possibly leading to die-off and a severe decline in civilization. Expanding and enriching the cities (the exact reverse of 1950 to 1970) is both the best and lowest risk alternative.
Best Hopes for Few and Small Rail Suburbs,
Alan
I grew up on some acres and we grew a garden that was probably about half an acre. I did a lot of that work operating a tiller, planting, weeding. My reaction: One neighbor with a green thumb could teach 5 others. Plus, there are TV shows, web sites, books, and advice at a garden store.
Totally works if the problem is a slow one. If the problem set in fast, (being fine one day, and then 20% short on food (in your example) or fuel (as the thread is about) the next week,) well, yes, a neighbor can teach you how to grow vegetables, providing you have seeds to plant, and reasonably soil to start with, and plenty of jars to put them in once you harvest, and of course, that it is the right time of the year to plant, and that you don't need to eat for a while until the plants mature...
Same thing with public transit. Great idea for slow problems, but I don't read a bunch of stories about all the of extra bus/train service Atlanta has added in the last two weeks, because 1) They didn't, and 2) They don't have spare buses/train cars to add to existing routes to deal with the crowding 3) The new routes aren't there yet: Even if it just consisted of running a bus down a main street, nobody would know to stand on the corner and wait for the bus without a major amount of outreach...
BigeasyAlan's posts might be a bit hard to take if you are one of those folks trying to hold up your end of the suburban American dream. I'm not any more intuitive or brighter than any of my fellow serfs but I saw the futility of suburban sprawl long before Jim Kuntsler made the scene. I had lived abroad and had seen the vitality of European village life. I have returned several times since and that vitality is still intact. There is certainly vitality in American life in some neighborhoods like Queen Anne or Ballard in Seattle for example but the sprawl suburbs there are as poisonous and as devoid of a future as all the low density suburbs all over this country. Gail the Actuary has done marvelous work detailing the risk of grid failure and it is worth keeping in mind that most of the Southeast and South west parts of this country were lightly populated before electrification, by that I mean rural electrification. Without energy profligate AC and cheap transportation energy those areas are simply not inhabitable. With the advent of Peak Oil and Peak Energy, their status becomes ever more untenable. It seems intuitively obvious that there will be depopulation and out migration from the most distant suburban bedroom communities. Once the flight starts I would suspect the left behind vinyl sided dungboxes will look like Detroit in short order. Parts of Florida already do now. If I were living in the SE or SW today with the specter of PO and now obvious recession and maybe the "D" word,I would be sitting down with my family with the Rand MacNally spread out on the kitchen table and asking for suggestions, and then packing up the minivan and mailing the keys back to Freddy and Fanny.YOYO.(You're on your own).
There's a site called Mystery At Webb Hill. It's about a skeleton found by some children in Utah. It was put up by local law enforcement and others hoping to identify the deceased.
I found it interesting because of the glimpse it gave of life in the US 100 years ago. The bones were found in a cave barely big enough to lie down in, along with some clothing and a quilt. Forensic analysis revealed that they were of a boy about 15 years old, who did heavy labor (especially with his right arm). He died of pneumonia. They figured he was a migrant worker who was living in the cave. He got sick, crawled into the cave to rest, and never recovered. (He apparently blocked the opening of the cave with stones before lying down, which is why his remains went undiscovered for so long)
The quilt turned out to have been sewn by local women. This was customary: the ladies in town made quilts out of scraps and gave them to the indigent. (They interviewed elderly residents, trying to find someone who remembered the boy.)
And it was not considered unusual for a boy so young to have left home. Families often could not support all their children, and booted out the older ones to make room for the younger ones. Many boys from the east made their way west, working as miners, farm laborers, etc.
Anyway, the site also has a description of the town back then. It said each house was on a one-acre lot, and people grew most of their food on their lot. One-acre lots were considered close quarters, but they wanted it that way, to foster a sense of community.
Of course the population was much lower then, but it might be a model for a sprawling city like Atlanta.
The one acre lots back then had small homes (without driveways) and much of the rest was tillable land.
Modern Suburban lots have had the topsoil scraped off, construction debris hidden in the lot (truly wasteland when you hit that pile of rubble). The ground has been treated for decades to make ideal lawns, which is almost the exact opposite of good farmland.
VERY poor tilth, low or no humus, depleted micro-organisms, no balance in insect-predator, the residue of chemicals and fertilizers designed for the perfect lawn.
The homeowners of a century ago knew how to farm (and can), what varieties to plant and when (and how close, how deep, how damp, etc.)
The homeowners of today mirror their "soil".
Homeowners of 1908 would have several years of struggle to get a decent crop from modern lawns (add LOTS of humus #1, and mix it in, some green manure crops, etc.). Modern homeowners with modern lawns will starve.
Alan
They would if they had to support themselves tomorrow, but I seriously doubt it will be that sudden. They'll have a chance to learn, and build up the soil. And those with knowledge can teach the others.
People are already doing it, driven by high prices and a desire for higher quality foods.
The example given is off-base housing near Ft. Campbell (I know the area, largely developed in late 1940s & 1950s for Airborne Division and stable since then).
That this is not modern Suburbia can be inferred from "An old barn on the property has been converted to a chicken coop..." and then a mention of goats in the future.
Another example "This year it has tripled in size into a five-by-seven-foot plot". 35 ft2 is VERY good for getting experience and knowledge, not close to feeding one person for one year.
Leanan, these examples have viable soil left over (as does my neighborhood, if lead residue is not an issue). It was not till the late 1960s or so that developers routinely scrapped away topsoil. Burying construction debris on-site became habitual, perhaps in the 1950s.
A farmer of 1908, shown modern lawns and grabbing some soil to measure tilth and worms, and spading a few spots, would call most of them "wasteland". Not worth the effort to plant. Perhaps a little grazing if the poisons could be worked out of the soil.
Alan
"Hurricanes occur every year."
Hurricanes do not hit the the refining area of Louisiana and Texas every year.
"Sorry I am sick of listening to dumb arse republicans say oh let the market work,.."
Dumb arse Democrats have been content to do nothing for years, too; have they not?
Dumb arse politicians (Including a lot of dumb arse Democrats) have placed 85% of the continental shelf off limits to drilling resulting in production being concentrated in a "small" area of Louisiana, Texas, and Mississippi. Please note there are not too many hurricanes in North Alaska as well as federal lands in the West where oil companies can not drill.
"then you better have supply in STORAGE for at least a 21 day extra supply. Its a national issue."
Please refer to how letting the market set prices puts an end to lines and stations running out. There are tons of editorials, articles, and letters to the editor to help you understand.
http://townhall.com/columnists/NealBoortz/2008/09/29/how_to_solve_the_ga...
That's a good one for openers.
The area that is affected by shortages is just several states that are served by two large pipelines. Just who should pay for storage for a 21 day supply of gasoline? It sort of sounds like you want the government to do this. If so, why should taxpayers in Arizona and New York pay their money so you won't be inconvenienced in GA? (Or wherever.) If those states think this is a problem then let them foot the bill.
By the way when left alone markets ration scarce goods and when governments mess with markets markets you get shortages, rationing, and long lines. Furthermore, oil refineries are built close to supplies of oil; I guess you are going to tell me it is those dumb arse free market guys that kept the oil companies from drilling off the Atlantic coast?
have placed 85% of the continental shelf off limits to drilling
There is an implication that somehow potential production is proportionate to acreage. NOTHING COULD BE FURTHER FROM THE TRUTH !!
Off-shore Louisiana has about eight times the production of Off-shore Texas (with Z E R O restrictions on or off-shore, Texas cannot produce enough oil for their own needs, Texas is an oil importer). There is likely a small amount of oil off-shore the Atlantic, but not enough to make a difference. Likewise California.
The good acres have been leased and drilled already. I would prefer to save the little that is left for our children's tractors and garbage trucks. But planning for the future was a conservative virtue (see Eisenhower) but not modern conservatives. DRILL ! DRILL ! DRILL !
as federal lands in the West where oil companies can not drill
DRILL Yosemite ! DRILL Yellowstone ! DRILL Glacier (soon to be renamed) ! DRILL EVERY National Park !!
Alan
I know you are being sarcastic, but I can't help myself.
Drilling Yellowstone?
Could there be any oil potential in a super volcano? Drilling the Yellowstone Plateau straight into the underneath magma chamber sounds like an ill advised experiment. The Volcanic Hazard section is suggestive of a very high pressure system there.
Not oil, gold. There's gold in yellowstone... and we should dam the grand canyon and yosemite canyon. In fact, while we're at it, let's just abolish all parks, what good is all that grass and trees anyway? We could put parking lots there.
Puhk,
The demand for the affected areas of the South is 5 mbpd under normal conditions. There's a 2 mbpd shortfall per Gail.
People are panicking, topping off their gas tanks and illogically wasting gas and time looking for open gas stations. Why? Because
there is no overall plan to reduce demand and they don't know what to do.
The solution is for demand to be reduced in an equitable manner so areas do not go dry and to avoid demand destruction.
The government MUST ration gasoline along the Colonial pipeline to reduce demand. This is particularly true in areas closest to the refineries. Limit purchases of gas, close businesses and schools one day per week, buy gas on alternate days, etc. People will bike, carpool or take public transport if they can't buy gas. Most refineries will be up and again running in a month.
Instead your 'free market' solution is oddly for the states to 'foot the bill'. (Really more of a State's Right's solution)
Right now under a freemarket we HAVE shortages, long lines and some rationing by price. Most gas stations buy under long term agreements so they can't simply outbid the next station as under a true 'free market'.
Look at the current situation. If a totally free market was in effect, gas station owners would keep raising prices until the people stopped buying and then the price would crash because many people would be out of money(demand destruction) when more supplies started to arrive. Boom and bust.
Government COULD do a much better job then the 'market' by coordinating inventories and allocating supplies. It's likely that oil marketing companies which normally compete with each other will NOT cooperate to conserve fuel without government telling them to.
But keep on repeating your Conservative Mantra(Government is Pure Evil).
We wouldn't want for you to strain your brain cells by actually thinking.
Or you could try thinking outside your box.
The government MUST ration gasoline along the Colonial pipeline to reduce demand. This is particularly true in areas closest to the refineries. Limit purchases of gas, close businesses and schools one day per week, buy gas on alternate days, etc.
Like New Orleans and surrounding suburbs ?
How will the North Shore commuters drive 34 miles (each way) to work ? And then to buy food, etc. ?
Surely you do not think we are "all in this together" do you ?
Alan
I don't know NOLA.
I would guess that the North Shore is a rich suburb.
The easiest thing for the rich to do is buy a 50 mpg hybrid so the problem goes away--if all cars were 50 mpg instead of 22 mpg average we would go from needing 5 mbpd of gasoline to less than 2.5 mbpd. But in the short run those folks should look at telecommuting for most of the week.
They also have to drive everywhere (food, etc.) and have 10x the road area/capita to maintain (remember that asphalt just needs a little upgrading to become fuel)., that they will be stranded in their homes if they cannot drive (age, disability, DWI).
Their services (pizza delivery, plumbers, postal, UPS, etc.) all require MUCH more fuel to deliver.
They have to carry the weight of all their infrastructure (less $ for schools) as well as their personal consumption.
Alan
Perhaps we should nationalize the oil companies, like we are doing with AIG and Freddie/Fannie. That should fix us right up.
Print a little money, too!
Right now with state governments limiting price increases we have lines and dry gas stations.
This is so classic. Use government to mess up a market. Then blame the market itself for the disaster.
Regarding people panicking and topping off, this might have been true two weekends ago, and then the problem moderated somewhat. But now, at least in Atlanta, people are not in panic mode anymore, they are in survival mode. I am amazed at how quickly we reduce to a day or two time frame and our individual world perspectives. To wit, while there is plenty of talk regarding the financial crisis ( myself included) more heavy on our minds here in Atlanta is how do we find gas, when do we decide to commit to a line ( duh, when you are almost empty) and what must next be curtailed. Believe me, no one is getting into one of these lines to buy four or five gallons of gasoline. There is significant cost associated with queueing and no one is topping off.
There is not one refinery in the southeast, nor do we have the storage capacity that other areas have. For whatever reasons those are, they are. We just have to make do with what we have.
It seems to me that the industry has deliberately chosen to draw down gasoline (and crude) inventories, especially on a Days of Supply basis. Since we have the SPR, one could understand drawing down crude inventories, but we don't have a SPR for gasoline.
It is my understanding that the refining of gasoline isn't currently profitable in the USA so I can't fault them for cutting back-maybe the refiners feel they also deserve a 700 billion dollar cheque-why not?
But it has been a long term trend.
Americans start to panic, gas not available, it's the end of the world and posts on TOD!!! Some parts of the US that few people in the rest of the world have heard of are short of gas for a while following two hurricanes and government intervention to prevent price rising from obscenely low levels.
Nothing of any importance to see here folks, move along to the next block where global financial meltdown is occurring and history is being made.
From Gail's post above
"What has happened is basically, the commercial credit market, or commercial paper has pretty much – (inaudible) – by some of the actions that are being proposed, which has forced those borrowers into limited amounts of capital...." (followed by more words being minced)
The message is that the "credit crunch" is affecting this, just as it will affect ALL other business.
Should have said not very profitable.
Maybe the theory is that just-in-time inventories are good financial management. Nice, but a problem.
I wish that they would deduct MOL from the published inventories, so the don't suggest that we really have nearly three weeks of inventory, when we really don't. It would be more impressive to show that we went down from 10 days of inventory in 1992 to one day now, for example.
Regarding MOL, that was my point about crude oil inventories, in my September, 2007 missive on net exports and crude inventories:
http://www.theoildrum.com/node/2975
The five year range just reflects minor variations in a thin margin of supply in excess of MOL for crude oil, and the same thing is true for gasoline. It's really best measured in terms of hours of supply in excess of MOL. But of course, we have a SPR for crude, but not for gasoline.
WT
Having done a bit of work in production scheduling this is exactly what I'd expect to see as consumption increases, The pipelines transport 'batches' of fuel and as their utilization increases you don't have to increase the size of the storage tanks at the terminals because the time between batches of product (of the same type) decrease as the consumption increases (There being a fixed minimum batch size), so you compromise between the cost of the batch change loss (the mixed product that needs to be reprocessed) versus increased storage costs (required for larger batches/fewer changes). No conspiracy just economics. Problems only occur when JIT (Just in time) become JTL (Just to late).
Its also strange to hear the of "anti gouging legislation" and "failure of the free market" in the same breath. Pricing is the control mechanism of the free market, so artificial restrictions (legislation) distort the market.
It is always more acceptable to vilify the seller than look at oneself isn't it. As I say to my children when they say they were "ripped off", "Did the guy have a gun to your head? No then you weren't ripped of, you made a poor choice"
Neven
I bet if there was no anti-gouging legislation prices would have quickly went up to 10, maybe 20$/gallon. I agree - this would have saved the long lines problem, but other problems would have arised - for example low-income families being stuck home or out of work, because they are priced out of the market.
For basics like fuel and food anti-gouging is a must, otherwise we may end up with a revolution.
There is a difference between gouging and supply and demand. Buying from wholesale at $3.50 and selling at $7 might be gouging, but buying trucked-in fuel at $5 and selling at $6 would not.
If there were sufficient incentive, gas would flow from other areas and "spread the pain", with modest increases in prices over a broad area and high increases in the most affected area.
Rationing would do more to prevent shortages than price controls, and would help contain prices. Plus, if you were poor, you could make do with less and sell some of your ration to others at a profit.
The real solution for the poor, of course, is to have mass transit available. Oh well, not this crisis I guess.
I think the problem is that service stations are afraid to buy $5 gasoline and sell it for $6 because of the ill-will it would engender. Also, they are afraid that they would be charged with price gouging. Even if they were cleared of charges, the time and legal fees in defending themselves would be a problem. There is also the possibility of bad publicity.
I think they are also afraid they wouldn't be able to sell it for $6.
A lot of them were burned before Gustav hit. They bought expensive gas, fearing another Katrina...and then couldn't sell it at a price that even broke even.
If they knew for sure the price would stay high, they'd buy, but now...there are dealers just refusing to pay the high prices. The manager of a Costco store was in the news saying he'd rather have no gas than pay the high prices they were asking.
I suppose an easy way out would be for the city/state to pay the spot spread and transit to get more gas to the distribution hubs by truck or rail, and make it easy on the retailer. Just "making good" on previous contracts dropped by force majeure would seem to do this, but at significant public expense. A temporary flat tax on all gas sold could cover this expense while discouraging driving and hoarding.
If it's a logistics problem, there should be a solution other than "wait and see".
An increased tax would be an interesting solution but georgia is a red state, so I'm guessing that new taxes are off the table politically. Unfortunately something like this couldn't be possible to fund any other way because the state of Georgia is facing a 6% budget shortfall this year. All state agencies are getting across the board cuts except to K-12 education.
The short answer is: "it depends".
When there is a minor disruption (like the current one IMHO), supply and demand could work it out relatively painlessly. Prices will rise moderately - some "soft" demand will be destroyed, people will cut a few inessential trips, slow down a little bit on the highway etc. But if the shortage delves into essential demand - say people going to work, to the stores etc. things start getting ugly, and IMO a government action is necessary.
IMO the regulators' mistake in the South East is not in imposing the price ceiling per se, it is imposing it too low. Should prices be allowed to rise more dramatically (say to ~5$ instead of $4) gas would still be affordable for essential trips but soft demand would have been affected and additional supply would also be attracted too.
Otherwise without a price ceiling at all, it is indeed very likely a lot of people will profiteer by demanding outrageous prices.
Well, OK, but it looks like they're stuck home not working anyhow. And since there was little margin in the controlled prices to pay for trucking in supplies, lots more of them are stuck home not working than was strictly necessary. And each day they stay home they lose a day's wages instead of just a buck or two. But, hey, that's OK, they've got their dog-in-the-manger satisfaction, and that's all that counts, right?
Let the Revolution come, you will all be better off for it.
This is a case of free market failure. Or perhaps just simply, the refiners and gasoline distribution did factor in the potential cost of the grey swan event, but only factored in the probablistic cost to their own business from any supply disruptions. The very large externality to the overall economy was simply not part of their computation. This is clearly yet another case where government is needed to insure that externalities are taken into acount in planning.
Then we have the response to the easily predictable supply shortage. Putting the fear of persecution into gas station owners/operators. That may be great populist politics, but it only makes the problem tougher. With any rational response system, as soon as a shortage is in the pipeline, i.e. even before shortages start showing up, is the time to take action to mitigate the response. I'm sure Atlanta drivers would have suffered less, if say the state had imposed a maximum speedlimit of 50mph, and a $2/gallon surcharge for the duration of the crisis. At least they could still get to work. And they'd have spent less time driving slower, than hunting for gas and waiting in line. Not to mention the mental stress of worrying about whether they will be able to get another fillup. Just another example of Bob Shaw's, humans are dumber than yeast in action.
I think this is precisely the situation. Nobody is concerned about the externalities. Their biggest concern is the next quarter-end financial statement for their own organization. This makes sense for an individual company, but not for the US in total.
Companies in the US are in operation to make a profit, not take care of people's needs. If it is not profitable to keep the SE well-supplied and there is no government mandate to make them provide supply, then it is just business to the them.
My company plans and staffs for the norm, not the extremes. When extreme events occur, we may have some breakdowns, but those infrequent events are not justification to them to make sure things all go efficiently during high volume transaction days. Plus they always work from an optimist's view. They do not like thinking or planning for worst case scenarios.
And all of that is perfectly rational since most customers simply refuse to pay for redundancy to handle the extremes. Which is what a lot of the discussion today has been about - Joe and Jane Sixpack (and their academic enablers) ultimately want to have it both ways. They demand politically capped dirt-cheap rock-bottom nothing-in-reserve JIT pricing - until in a pinch, JIT inevitably turns into just-isn't-there. Then they go ballistic and fight in the lines they brought about, even while they demand even tighter political price caps leading to even longer lines. There's simply nothing to be done with or for such unreasoning fools except to get out the popcorn and watch the show, while doing one's best to keep clear of their fists.
Gail wrote:
"At this point, I estimate that there is a shortfall of more than 2 billion barrels a day of refining capacity--more than 10% of US total, nearly a month after Hurricane Gustav hit."
I presume you meant to type 2 MILLION barrels a day...
Oops! I'll fix it.
The free market is oversold (e.g. it is a bad way to run health or most natural monopolies), but it doesn't deserve the bum rap (wrap?) it is getting here. What should happen is that when there is a shortage of inventories then everbody who went to the cost of keeping inventory makes a lot of money as prices go through the roof. And of course the price is high enough that there are no queues. The money made in these situations encourages inventories.
As in all economic situations: transparency is the key to a good outcome. If people have secret inventories and no one knows how much inventory there is, then brilliant weather forcasting and actuarial expertise will still leave you with a pure guess. So I repeat one of my hobbyhorses: the cost that companies should pay for limited liability is large amounts of enforced transparency on any subject that is in the public interest.
But due to the anti-gouging laws dealers can't raise their prices to the no-queue levels.
The current problem is that the price cap is set by when people will complain, not by when they will stop spending, and people will complain at the drop of a 10-gallon hat....
Its funny that at the end of communism no body believed in it, and at the end of capitalism nobody believes in it... Looks like we'll be having another go at feudalism.
Maybe we can come up with something new. Perhaps 'declinism", for an econmy built around decline.
not wanting to sound like a conspiracy nut, but Atlanta is a great place for a social experiment. A chance for elements of the government to practice "boiling the frog, slowly" - reduce mobility because of gas shortages. When everybody is out or just about, martial law comes into play under the guise of "security for our own good" cause the state wants to protect us, everybody's big brother just wants to give them a hug, right?
Funny thing is the 1st battalion of active duty soldiers to be stationed on American soil, is in south Georgia and their mission is to quell domestic disturbances, I don't think they mean spats between husbands and wives.
http://www.armytimes.com/news/2008/09/army_homeland_090708w/
Glad I got to live long enough to watch the empire crumble, what follows? Chaos interspersed with more game shows, a depression needs entertainment. Guess its time to get busy on that garden I always wanted to plant, with my schedule it should be ready for seed by march 2009. Will George W. declare himself President for Life before January 2009? What an interesting time to be alive.
One slight problem with that is surely having CNN based right in the middle of the chaos. If you look at Google trends for "gas shortage" there was at least a 5 day gap (more like 11 if you include Gustav related problems) between gas shortages becoming serious and and media reports starting to report the fact. CNN and the Atlanta Journal Constitution were among the first to break ranks - CNN with it's suspiciously professional "I-reports" and AJC with its gas shortage blog.
So If I was going to do an experiment I'd have probably avoided a city with one of the world's largest international media organisations based there. Must be a real eye-opener for them.
And now there's this from MyFox Atlanta: Georgia Gas Shortage Could Last for Weeks
Total nationwide searches for "gas shortage" has levelled off in the last couple, of days but that's possibly the weekend effect. Takes a day or two for Google trends to catch up so we really need to wait for Monday data to be indexed to get a true sense of the nationwide trend. However "atlanta gas shortage" searches are still increasing despite the weekend.
Top Green line - "gas shortage"
bottom Green line "gas shortage" news articles
red line "atlanta gas shortage"
Orange "nashville gas shortage"
blue "asheville gas shortage"
Click above chart to go directly to full google trends page.
Top 10 States by searches for "gas shortage" last 30 days
1. Tennessee, United States
2. Georgia, United States
3. North Carolina, United States
4. South Carolina, United States
5. Alabama, United States
6. Kentucky, United States
7. Missouri, United States
8. Florida, United States
9. District of Columbia, United States
10. Indiana, United States
Meanwhile, the Atlanta Region runs out of water
http://tinymicros.com/lanier/
The "dead pool" of stagnant water starts at 1,050'. During drought, Lake Lanier drops about 0.1' per day. The recent tropical systems dropped an inch of rain or so, but the drought appears about ready to restart.
Dead pool water (likely not palatable) in the tap water on Election Day ?
A clear failure of leadership (other than Praying for Rain) IMHO. This has been two years in the making.
And one day, northern Georgia will run out of "dead pool" water.
Alan
Hi Alan,
A bit of a correction: The dead pool is at 1035' elevation, which as you implied is where power generation stops. Atlanta's water intakes are at the outlets of the hydro plant, so they'd have to move the intakes into the lake and start pumping. When it got down to the lowest level last year the water did start tasting strangely.
Lanier's at 1054' right now and we probably won't get down to 1035' before the lake starts refilling again with the rainy season.
The blue line here is our data for this year, you can see Gustav pretty much bought us about three weeks worth of water, which could have been the difference between "not so bad" and "starting to have big problems". Now that the El Niño/La Niña event is over for now, we can expect some lessening of the drought conditions (we hope). Incidentally, this phenomenon is why the hurricanes started up again this year after having a relatively few the last two years.
Thanks for the correction. I was "pretty sure" that I had read that the dead pool was at 1,050' but apparently I was wrong.
"Hoping for more rain" does not seem to be the most prudent policy though.
Dead pool water should be drinkable (after more chlorination, etc.) but quite likely to be unpalatable. Has the draw down so far affected perceived water quality ?
Thanks,
Alan
Not yet, although this spring we had a turn-over in the lake that caused an algal bloom. The water was terrible then! It tasted like sulfide. (I had some vague intestinal problems then too, but nothing drastic.)
I also share your desire to avoid the "conspiracy nut" label!
That being said it does seem like a good idea to choose Georgia to station the army. There are already so many army people there, I believe. It is a very "patriotic" place, I have heard. There are many army families, gun-toters and sports-a-holics. They won't stage protests or sit-ins (that's for the lib'rals up north!).
If Atlanta had built a Non-Oil Transportation Alternative
to their Oil Based system (as Miami plans to do), then this trauma could have been avoided. Many would have switched to Non-Oil Transportation, leaving "enough" gasoline for those that truly had no alternatives. In other words, dramatically expand the elasticity of demand for gasoline by providing a viable alternative.
Spend the money on DRAMATICALLY expanding MARTA and not subsidizing oil company inventories, further subsidization of sprawl, road maintenance, etc. And make bicycling safe and convenient (even if it inconveniences drivers).
http://www.cfpt.org/pages/wctv
Is one vision.
pdf at
http://www.cfpt.org/documents/worldclass_map.pdf
Another more limited vision
http://atlanta.bizjournals.com/atlanta/stories/2008/08/25/daily61.html
I would have expanded MARTA subways much more, major emphasis on bicycling and very few more roads (HOV lanes only).
A pdf map of Concept 3
http://tpb.ga.gov/Documents/TPB/Aug08/Attachment%202%20_AgendaItem%20IV_...
Miami built a single "elevated subway" line about the same time that MARTA was built. It languished for decades, with minimal TOD and relatively low ridership. Many transit advocates questioned whether it should have been built.
Then Miami approved a tax and plan to build 103 miles of elevated subway (Bush wants buses and has pressured them) and actually started building extensions. 90% of population will be within 3 miles and over half within 2 miles of a station. Add e-bicycles and cars will be optional for most people. TOD EXPLODED (I noted 15 of 23 building cranes within 3 blocks of a Metro station in a 2004 visit).
Simply announcing expansion has increased Transit Orientated and ridership.
If Atlanta did the same for MARTA, I would expect comparable results.
Best Hopes,
Alan
The problems with retrofitting mass transit to a landscape dictated by sprawl are (1) the costs of building and operating the system will be enormous, (2) there will still be many people who will have to drive because the transit system layout doesn't suit their particular needs, and (3) it doesn't solve the original problem of poor overall land use planning.
Here in Silicon Valley (Santa Clara Co., CA) we are seeing some transit oriented infill development around the county's light rail lines. But ridership is still relatively poor, and part of the reason is the ridiculous politically dictated routing. (The Los Angeles subway/light rail system suffers from the same poor routing.) Politicians act as if extending BART to San Jose will solve all our transit problems, and the massive cost of BART is starving the existing heavy rail system (Caltrain, ACE) of upgrade funds. The heavy rail main lines have been in place for well over a century and much development historically has been centered around them. But they don't go to where the homes, jobs, and shopping are located today.
How did we get here? LIke L.A., the SF Bay area had a number of privately owned light and heavy rail systems. When the area boomed after World War II, the highway system was expanded and the passenger rail system withered. The network of rails dwindled to a couple of main heavy rail lines, and the remaining right-of-way was sold to developers for the most part. Eventually all the close-in agricultural land was developed and real estate developers started pushing further out into the boonies to satisfy the demand for (relatively) cheap suburban housing. The old downtowns built around the rail line crumbled as economic activity moved outward. Highway congestion soared, money was poured into expanding highways, and a token effort to ensure commuter rail's survival meant it was still more time- and cost-effective to drive.
Now we're seeing the effects of 60 years of development around the automobile. BART is sexy but horrifically expensive because it requires grade separations and uses unique equipment unlike any other rail system in the world. But the promise of BART in the distant future keeps the poor stepsister (Caltrain) starved for funds. County light rail muddles along but is lightly used because of the gerrymandered routing (to some degree dictated by the availability of unused rail ROW) and ridiculously low average speeds in the denser parts of San Jose. It's unlikely any future rail system will be built that can address the transportation needs of most of the Santa Clara Valley, though, because the housing, jobs, and shopping are just too spread out. We're the victims of our own land use planning.
But because California refineries haven't had to shut down for a pair of hurricanes, we're not suffering any gas shortage at the moment. So people grumble about the cost of gas but still drive to work. Fortunately for me, most of my transportation needs can be handled on a bicycle.
See Sacramento's Plans (click to get detail)
http://www.sacrt.com/images/20year.jpg
Green -Regional Rail
Blue/Purple - Light Rail
Orange - Bus RT, should be streetcars (maybe Light Rail)
Yellow - Enhanced Bus, should be streetcars or Electric Trolley Buses
Sacramento has adapted to the built environment (took built and never opened freeway, one side to Light Rail, other side to linear Park & Ride) as well as taking the edge of parking lots, single track "jogs" to get around factories/warehouses and so forth.
In 2006, 45% of transit pax-miles were on two shorter Light Rail lines, the rest on buses or para-transit.
In France they simply take a couple of lanes from rubber tired traffic, a policy that I advocate for the USA (more road congestion > more rail riders) and are building 1,500 km (in very city of 100,000+) for 22 billion euros.
San Jose has a poorly/politically designed route, especially through downtown. The politicians overrode the transit planners on that one. San Jose also operates (or did) under a "cost no object" philosophy, BAD for economics.
The USA trashed virtually every prime commercial property and a large number of established well built neighborhoods in just 20 years (~1950-1970). We did it once, we can do it again. Much of Suburbia is very poorly bui8lt and will require major repairs in the next twenty years. Scrap instead of repair if it is not energy efficient.
Best Hopes for a Better Urban Form,
Alan
Excellent comment Chuck Fry. My brother who live in the central valley reports that new suburbs are even today springing up in recently cleared fruit groves. It would seem that Callifornia needs to have a moratorium on ALL new suburbs that lack good mass transit access. None. Zip. Zero. No mas. It would seem to me to be in the state's interest to promote high density living concentrated near transportation links and jobs. Strip malls and office parks distant from where folks live seemed IMO to be doomed. Of course if you live in Callifornia you are living in a massive dysfunctional moratorium only legislative system and determined powerful special interest who wont allow spending on anyone but themselves.
It is my understanding (I am NOT an expert) that France experienced some sprawl till they passed a new law/rule.
One cannot get a building permit outside an existing urban area until that urban area reaches a certain density, and then the new building must be contiguous to the existing urban area.
Some special provisions for bona fide farmers.
Alan
Nice post. This gets at the heart of the issue of why it will be so difficult to retrofit and expand existing transit systems. There is a fundamental incompatibility between existing, low density suburban development and mass transit functionality. Automobile-based development is inherently inefficient. Transit-based development is, by definition, compact and efficient. Use of existing rights-of-way may work in some areas near central cities, but new corridors will need to be purchased within many other areas. This cost alone will be staggering, particularly in heavily developed areas, to say nothing of infrastructure and operations costs. This leads to bus systems as the only viable alternative outside of central cities.
I'm afraid that while progress is being made within cities to correct some of the land use planning mistakes of the past (i.e., with compact, mixed-use development), the old paradigms continue in unicorporated counties. For example, the 20-year growth plan in the county I live in (Snohomish, WA) calls for over 100,000 additional residents, but only about 30,000 jobs within those areas. That means a whole new generation of commuters looking for ways to get to work. I'm beginning to agree with Kunstler's vision that far flung suburban and exurban America may indeed be toast and that certain sectors of the housing market will never recover.
I like your post but disagree with one point: that existing rail lines don't go where the jobs are.
The vast majority of the jobs are in the Golden Triangle, through the heart of which passes the Amtrak/ACE lines. If these were double-tracked and the light rail grade separated (N. 1st at Montague!!!), then you would have the makings of a decent N/S/E/W rail system backbone. Especially important would be to rezone the area around Lafayette/Tasman, knock down all those single-story office buildings, make the golf course a 9-holer and you'd have a new viable city center for Santa Clara.
Also, there is a great 'no-BART' plan drawn up that uses mostly existing rail and ROW to build a route from downtown SJ, past the airport, and through the Golden Triangle towards to the northeast, another option for getting people moving south-north.
http://www.bayrailalliance.org/caltrain_metro_east
The only hope for an effective light rail is a new direct line up Hwy. 87, bypassing the snail-paced route downtown, passing through the airport and reconnecting back at N. 1st and Charcot. No plans though.
So what I do not understand is why in 2005 with Katrina the gasprices jumped because of refinery outages and fear of shortages. Why is that not happening this time?
The election is 40 days away, and recent (last two years) gas price increases have made gas prices a "sensitive" political issue.
Alan
Yes. And that infuriates me.
Supressing prices insures this problem gets worse, that alternatives won't be developed.
Almost as stupid as bailing out the big shots on Wall Street.
Almost, but not quite.
But this is suggesting that the government at will can have a huge influence on prices. I can see this being true for dumping extra subsidies on a commodity, but as far as I know that is not the case here. I can't see how the government does manage to influence the supply/ demand picture here, so prices should still fly trough the roof. I doubt that fining price gouging does the trick. I mean, after Katrina gas prices shot up drastically about the FEAR of shortages; this time there ARE shortages and avarage gas prices keep on dropping. What else is going on here? Before the last election there were also (contested) rumors about the Republicans messing with the oil and gas prices, but how can they?
Again today in Charlotte NC there is little gasoline, again might as well shut the city down, people cannot get to work. It would seem to me again that someone must make sure there is liquid transportaion energy for the economy or the economy will stop.
Let me see, this really will screw Macrorys bid to be gov of North Carolina, he is the mayor and has been a failure in his leadership. when there is a drought with water there are restrictions put on usage, well gasoline is almost as important as water, and how bad would it have been to limit gasoline to 10 gallons on odd and even days for a month???
Yes, there's someone who cares about gasoline inventories. Rice University's Amy Jaffe has been arguing for awhile now that there should be refined products inventories, not just crude.
Shell says U.S. Gulf refineries ramping up after Ike
Conoco says all Gulf Coast refineries back to normal
Air Quality in Atlanta ?
Has the actual quantity of gasoline burned had an effect on Atlanta air quality yet ?
Alan
Hard to say. Querying Georgia Ambient Monitoring Program is not quite reliable as there are so many factors affecting air quality, which vary by the day.
But I do notice slightly less traffic than usual methinks.
U.S. DOE to deliver SPR oil to Marathon Oil
Atlanta drivers follow fuel trucks to next stop
Perdue Delayed Asking For Gas Shortage Help
Gas Shortage Spreads Beyond Deep South
How is the gas shortage affecting your family life?
Government Gouging
Re: topping off fuel tanks making things worse.
What a load of rubbish. Let's bring some common sense here. Here is a little calculation:
Let's say an average tank holds 15 gallons (many trucks and SUVs out there). If before the shortage started, on average drivers fills up when there is one gallon left - then all cars held 8 gallons on average: (15 + 1)/2.
Then if after the shortage started drivers started to fill up when half-full, then the average moves up to 11.25 gallon: (15 + 7.5)/2.
So the "panic filling" would result in (11.25 - 8) = 3.25 gallons per car one-off extra demand. If everyone is driving 50 miles per day on average, this means something like a day and a half worth of extra demand. This is not significant compared to the stocks which in normal times run at around 20-22 days of demand.
Clearly the main cause of the shortage is refinery outages. Filling up may have caused it to be a little worse in the beginning of the crisis, but is not to be blamed for anything now that we are in the third week of shortages.
Re:topping off fuel tanks making things worse....
I agree that I don't think that this has any great effect on the supply past the first day or two. But one thing I noticed is that most stations around me went dry between noon Friday and noon Saturday. By Saturday evening some were getting in new supplies and today most have gasoline. The UT football game was in Auburn and the UGA game was in Athens. The governer's office in Alanta scoffed at the idea of calling off the GA game because of the gasoline crunch but the chief of police in Athens suggested that people not come to the game unless they could get there and back on a tank of gas as there was already a gasoline shortage in Athens. Now Chattanooga and Knoxville turn into ghost towns on weekends when UT does not play in Knoxville. I think that a significant number of those traveling to the games not only filled up before they left town but probably carried enough gasoline with them to insure that they were able to get back home. Nowadays i would not consider driving around with a jerry can of gasoline in the back, but I can remember doing just that during the Arab oil embargo in my youth.
After all the talk of cancelling the UGA game, the only notice they gave it on ESPN was to say 'they talked about postponing this game, saying there wasn't enough gas for fans to get here.' (talking head turns around to look at the crowd) 'Well, they got here.'
That was it.
And strangely silent in the news today, I guess it isn't any WORSE for the folks in Athens than it was last week. Less talk about the gas shortage this week, that's for sure. More talk about the Bulldogs sucking eggs, though.
When the available oil starts going down every year will governments enact price controls and rationing rather than let prices rise?
Lines are a sign of government interventions in markets.
I sure hope they will.
The ultimate nightmare is when farmers and truck delivering groceries being unable to get diesel. Whatever happens, these guys must never run short.
I haven't noticed any shortages in the DC area, and the Wa. Post reported yesterday that this area has not been affected. The closest outages I have read about are in Central Va. plus a few independents.
Isn't there anyone who cares about gasoline inventories?
Gail,
I would expect that the local news media is all over this story. Here in the West Coast I am seeing little to no news on this story. I guess the credit crisis has usurped all other news.
The MSM has been shy on the issue for more than 2 weeks now. I think they are afraid of causing panic, and I suspect it is also in part due to the politically delicate moment.
However the panic finally set it due to much more direct information channels - after all, after drivers are unable to find gas for hours, it becomes too hard to avoid the fact. Maybe CNN didn't report it, but it doesn't mean it is not happening.
I wish I could beleive you're right Levin and the MSM is trying to avoid being an alarmist. But such a motive would be contrary to everything we've seen them do for years. No offense to the folks in the SE but I suspect it's a two prong explanation: other big economic news and, in general, the MSM doesn't really care about the SE. If this were happening in PA or CA I'm sure there would be much more coverage.
The MSM sells "flash" and there's nothing sexy about cars waiting in line at a station in Ashville NC. Just like most national politicians the MSM doesn't have much interest in "fly over country".
CNN, AJC, Cox Enterprises are based right here in Atlanta. It's hard to imagine how such a huge and impactful event is not all over the news around here and the whole US actually. Especially given how uneventful is it usually. Instead the MSM is reporting it by the sidelines... it's BAU as long as they are concerned. At the same time it is a main topic of conversation among people, because it affects them directly. But what do I know, Britney Spears' sex life might indeed be the more important thing.
I think it is part of the "eternal optimism" mentality. After the hurricanes, we were told nothing much happened. If you talk to people on the ground on states from Texas to Ohio, you will hear a lot more stories about problems than reached the press.
The gas shortages are inconvenient truths that are certainly affecting the areas in question. I won't feel too bad if a few of the gas shortages start affecting Washington DC, as indicated in the story above. Legislators are more likely to think about the situation, if it is occurring in their own area.
It was nice to meet you at ASPO. The crisis in the East (coming) and Southeast (arriving) fits in the class that "you can drown in a river that on average is 6 inches deep." Inventories on average are terribly low. The East and Southeast are in the deep part of the channel.
It is hard to say if this can be resolved by late Oct. The fact that the Governor of Georgia left Saturday for a week in Spain and Italy underscores the inability to recognize a slow moving crisis. If delivery trucks are not being routed to the South to speed up deliveries even when they have gas there will be jams to carry it to stations.
Once the wheels come of the cart, logistic systems can be erratic for some time. Hoarding is a real issue as those who can get resources strive to care for their customers.
Social media and the Atlanta Gas Shortages: http://search.twitter.com/search?q=%23ATLgas
Wow. Whether the media is covering this or not, there's a lot of people freaking out. Rightfully so. In a town like the ATL, being without gas...ouch.
Just an example of the blog posts out there:
"Desperate Atlantans Use Twitter to Find Gas"
http://consumerist.com/5056342/desperate-atlantans-use-twitter-to-find-gas
"Atlanta Gas Shortage - How To Find Gas"
http://www.driveafastercar.com/2008/09/28/atlanta-gas-shortage-how-to-fi...
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if you are taking Marta into ATL at N. Springs Exit 5/400, the lot is full. Use park and ride at Mansell/400.
Alan
Why don't the gasoline stations with 90 cars in line just raise their gasoline prices by $1 per gallon?
I read that the Democratic Governor of North Carolina has invoked some law against price gouging. So are price controls forcing lines just like in the 1970s?
There are laws in Georiga and other states to prevent price gouging at the gas pumps.
Even if the price was $6, people still need gas to get to work, school, and the grocery store.
The reason people are lined up is because they can only get gas at 1 out of 4 stations if they are lucky. So the refineries are still not up to 100% since hurricanes Gustav and Ike.
This is a JIT "Just in Time" system, with little to no inventory, because there are no massive storage tanks to hold it. When the refineries are fixed, the lines will go down, and people will forget about it until next years hurricane season! This is only a small sample of what will come when peak oil starts falling down the slope. People are mad now, but when production drops for good, they will be outraged.....
Yes, but at $6/gallon it would have been worth trucking in additional supply making the shortage less severe.
State Governors do not control oil companies, refineries or hurricanes!
It is amazing how many people think the Governor can do something about the shortage.....
I guess he could tell all the state employees not to drive to work.
State troopers could stay home, and not burn gas....
Legislators could stay home, and avoid more useless laws....
I think that what they are saying it that the governor of Georgia could have asked to have EPA rules relaxed a week earlier than he did. This would have leveled the playing field for Atlanta earlier on. Part of the problem was having our own EPA blend that was in short supply. Even though the requirement was lifted last Wednesday, supplies are still tight. It takes time to get additional gas shipped to Atlanta, once the rules have been changed.
So now we can all breathe polluted air from the dirty gas!
Then we can sue the Governor for our asthma attack!
The basic problem is that there are so many people who drive long daily commutes with inefficient vehicles. They need to refill every few days. Given our extremely low inventories, it doesn't take much of a supply chain disruption before these people are lined up at the pump. Topping off fuel tanks has very little to do with it.
The best plan of action:
1) Co-locate your residence and workplace as close to each other as you can.
2) Try to arrange your life so you don't have to commute to work by automobile at all if possible. Walk, bike, or take mass transit if you can. If these are impossible, then at least drive the most fuel-efficient vehicle that you can get for your daily commute.
3) Keep your cars at least 1/2 full at all times, and top off whenever a hurricane or other disaster threatens the supply chain.
If more people tried to implement this action plan, the problem would have been a lot more manageable.
I heard Trudy Lundberg on the radio last night say there is no gasoline shortage, that prices are dropping, and that everything is hunky dory even in the U.S. southeast.
People are crazy if they think there hasn't been a significant demand destruction in the Atlanta area. I think making people wait for gas has more effect than raising the price of gas.
If you see a gas tanker driving down the road, you will see a funeral-like procession of cars behind it.
I don't see how the credit crunch will affect the number of jobs in downtown Atlanta one bit.
I thought some of you might want to see this:
http://ac360.blogs.cnn.com/2008/09/29/letter-to-any-politician-who-gives...
Look at the comments, people are confused and scared. That's NOT a good combination of things. Gives you a real glimpse into the future.
OTOH more than a few of those Atlanta residents are going to listen the next time they hear or read about global oil depletion. A few months ago I talked to a couple from an Atlanta suburb and they had never heard of peak oil or oil depletion-I would assume that isn't as common now.
From what I see on the Atlanta news, most people still think the government is supposed to step in and solve the gas problem......They do not see that the underlying supply will start dropping (due to peak oil) and the government will be helpless to stop it.
Mad Max observation #1. Asheville NC.
I was out enjoying a nice recreational bicycle ride on the Blue Ridge Parkway. A pack of Harley Davidson motorcycles went by, nothing unusual. Except each one had a 1 gallon gas can strapped to the back. Every single bike, about 8-12 of them.
You can all go back to sleep now.
We'll have to see how this really works out in practice. Is the fuel really here, or do we have to wait for it to come from Houston? It should be someone else's turn to have the shortage now. The total output of the refineries still isn't up to normal, so if Colonial is full, we either have extremely good imports, or some other recipient is short.
This has been the case for many years. Europe has high diesel demand, the US has high gasoline demand, so Europe (and Asia) exports its excess light distillates (gasoline), and the US exports its excess middle distillates (diesel). If this global redistribution would be blocked, much more refining capacity would have to be built worldwide, and parts of the world would be flooded with product it doesn't need.
http://www.nytimes.com/2008/09/30/us/30gas.html?ref=todayspaper
Frustration in the South as a Gasoline Shortage Drags On
Long Term Impact on Attitudes in Atlanta, NC and TN ?
Just a question for those on the ground, will this fade away in a few months (as a similar gas shortage in Phoenix & Tuscon did when a rusty pipeline broke) or will it have some subtle long term effect ?
Will remote, long commute Suburban houses become even less desirable ? Will there be support for the proposed one cent sales tax to support "Concept 3" mass transit extensions ? (Forget the 800+ miles of new highways in Concept 3).
Will people buy more economical cars (with smaller gas tanks) ?
Any speculation ?
Alan
It will take more than this to affect attitudes about driving vs public transport around Chattanooga. While many stations ran out of gas over the weekend, there was usually at least one or two that managed to stay open in any given vicinity and waiting lines rarely exceeded ten or so cars. There was much traffic on the roads and no one appeared to be slowing down to conserve gas. Part of this may be the local optimism ('happy times are here again!') generated by the preparation for the building of the VW plant here. New housing construction shut down las Jan. has restarted and many new subdivisions are being announced or started in the vicinity of the proposed plant. The only bright spot is that they appear to be planning on expanding freight rail service to area generally to service this plant. New mega-schools are being constructed on former farm land with no provisions for sidewalks or any other means for children to get to school other than by bus or car. Chattanooga had supported neighborhood schools until recently when the school board decided that 'consolidation' was a good idea. Of course most of the wealthier parents send their kids to private schools. Putting bicycle lanes (actually just painting a stripe on a slightly widened shoulder) on several of the main thoroughfares has generated many complaints and letters-to-the-editor from motorists who are 'offended' by the cyclists gear and attitudes. We have the free electric buses downtown which CARTA tried to shut down recently for cost reasons. The downtown merchants are now subsidizing their operation as they greatly facilitate tourists staying downtown to shop the whole downtown area and not just things close to the downtown hotels. I wish this service, even for a fee, could be extended outward somewhat as I hate the smelly diesel buses but I understand that the company that made the electric buses went out of business several years ago.
I'd hazard a guess that maybe 1 in 10 would consider a change.
I've seen many "for sale" signs on trucks (SUV's, pickups, etc), but they (the trucks for sale) are still being driven around town. I still see plenty of trucks with brand new dealer tags on them, no doubt bought because of "zero percent for 72 month" financing or "owner cash back" programs.
It takes a lot for people to want to sell their house and move, and right now it is risky financially if you have to sell your existing house in order to buy another one. I had a relative who had to move to an assisted living center, we sold her condo for about 25% less than we wanted, but we needed the cash to pay for her new place and, well, "it's a buyers market."
Anybody from Nashville here? Seems their "gas shortage" is old news already. Did anybody decide to relocate or buy a more economical car?
My guess is that the long-term affect of temporary disruptions like this is that the next time it happens, the anger reaction comes quicker. Anger at the oil industry who is price gouging the people. Anger at the owners of hummers. Anger at the media for not informing. Each time it happens, it feels more justifiable to lash out, because a mistake is a mistake, but a repeated mistake is intentional.
Violent crisis comes closer each time.
It's gonna be fun the next time Exxon, Shell, etc. release their quarterly "record profit" reports.
Alan, my guess is that the main change will be that in the future, any time a hurricane heads toward TX/LA, just about everyone will head to the gas stations to top off. Some people might have some gas cans and Sta-bil on hand and keep those filled and on reserve as well. We already have the phenomenon of people rushing to the grocery stores to stock up on milk and bread whenever a winter storm is forecast (WHITE bread and milk, of course, to color coordinate with the WHITE snow!), so I can see anticipatory topping off becoming SOP for many people.
A lot of people commute long distances here because they have cabins tucked in the woods or on the mountainside, and will be very reluctant to give that up and move into town. It is possible that we will see more people replacing their SUVs with smaller and more fuel-efficient 4WD Subarus (which there are already a great many of around here) over the next few years.
It is going to take more frequent and more severe and longer supply disruptions before we see anything much more radical than this.
The MMS says that almost 60% of gulf oil production is still shut in after Gustav and Ike.
Gustav hit 30 days ago.
All the Free Market people need to wake up. You are getting exactly what a free market means. In a free market, a corporation exists to maximize profit (hopefully to its share holders). A corporation will do that with brutal efficiency. If you want an entity that worries about the results of its actions in human terms, you got to let go of the Free Market corporation.
People are greedy (hence the current financial bind) and corporations magnify that characteristic. As corporations drive to squeeze the last penny out of that barrel of crude, they naturally consolidate facilities -- its more cost effective.
At any rate, if you want a resilient human oriented gas and oil delivery system (lots of small refineries and bulk plants like we had in the 1970s) be prepared to have a sub-optimal system that does not maximize profit.
I know of at least four smaller refineries that closed in the 1970-1990 time frame because they were "not profitable" (Sugar Creek MO, Casper WY, Blue Island IL, Tulsa OK). In each case, fuel is now transported in - except for Blue Island which was nice and close to Whiting. These smaller refineries would not be out due to Ike or any other SE coast storm. Just like in the Internet -- for a resilient fail safe system make it out of a lot of small distributed pieces. May not optimize profit, but it sure can stand a hit from a storm!
...and a .948 million barrel gasoline inventory build!
Good thing that Shadow stats guy isn't going over these weekly petroleum reports.