This looks ominous:
Of course we used a lot less gasoline in 1967, so on a ‘days of supply’ basis, this is probably the lowest level ever.
I just got back to Dallas from the ASPO conference, and we are having shortages here as well. My cab driver said he had been to several stations that had no gas, and my wife told me that the Texaco near our house is out of premium.
Someone asked during a panel discussion at ASPO whether we were going to have rationing by price. I answered that we are having that now. But prices aren’t going up nearly as much as you would expect during these sorts of severe shortages. Why? I think it’s a fear that dealers have of being prosecuted for gouging. So, they keep prices where they are, and they simply run out of fuel when the deliveries don’t arrive on time. If they were allowed to raise prices sharply, people would cut back on their driving and supplies would be stretched further. This article explains it nicely, and is well-worth a read:
Instead of raising prices, in an attempt to reduce demand for gasoline, thereby allocating gasoline that was in short supply by means of price, station managers simply let people fill up their tanks until the pumps were empty. Anyone who wanted gasoline after that was out of luck.
This is rationing by lining up. It is the alternative to rationing by price. Rationing by lining up creates no financial incentive for suppliers of the item in short supply to allocate new supplies to the region of the country which is experiencing a shortage. Instead, delivery schedules remain the same as they did prior to the shortage. This continues the shortage.
Whenever there are complaints about price gouging during a period of a shortage, sellers get the message. The next time there is a shortage, they hesitate to raise prices. They shift to the other allocation system: first come, first served. This subsidizes people who have a low value on their time. People who place a high value on their time prefer to pay extra money in order to attain their goals. But this is made illegal by the state. So, the shortage lasts longer than it would otherwise have lasted.
The official goal of the government is to make certain that everyone has access to the item in short supply. The government says that raising prices during a shortage is unfair. So, the result is the opposite of what the government’s official justification was for holding prices down. There is an even greater shortage, because people buy more of the item than they need immediately. They have no incentive to reduce their consumption, thereby making available applies to those who were at the end of the line. There is no incentive for anyone at the front of the line to refrain from filling his gasoline tank. So, gasoline runs out before the line runs out.
Such are the unintended consequences of government intervention. Personally, I would rather at least have the option of paying twice as much for gas than to either wait in line for a long period of time, or have to drive all over town to find some.
I also said last night that I don’t believe we are entering an era of gasoline shortages. I predict that inventories a month from now are higher than they are today. But the recovery will take longer than if prices had risen sharply.
What is the status of the refineries that are down? This story has the details:
EXXON MOBIL
• Baytown refinery, the largest in the U.S., is restarting.
• Beaumont refinery remains offline.
VALERO
• Houston and Texas City refineries should be back to normal in several days.
• Port Arthur refinery remains shut in but should begin the restart process in several days.
SHELL
• Deer Park refinery, third- largest in the Houston- Galveston area, is restarting. Normal operating rates are expected by the weekend.
• The Shell-Motiva joint venture refinery in Port Arthur is still shut in. Power has been restored, and production of gasoline is expected to begin this week.
BP
• Texas City refinery, second- largest in the Houston- Galveston region, has not restarted.
SOURCES: Department of Energy, the companies
I don’t believe any of ConocoPhillips’ refineries are still down, so their branded stations are likely to have supplies. In fact, CNN reports:
A ConocoPhillips (COP) spokesman said the company “is not short crude and our system is generally balanced.”
Finally, I have just returned home after 3 weeks on the road. I have a massive backlog of e-mails to wade through, and if you have sent me an e-mail and I haven’t answered it, please be patient for a couple of days. I am going to limit my time on the computer for a few days.
From the quoted article:
This is rationing by lining up. It is the alternative to rationing by price.
It is an alternative. Rationing by coupon is another alternative, last used in WWII, IIRC. I predict that if gasoline passes $6/gal in the next two years, we will hear members of Congress mention coupons, and if it passes $8/gal in that period, legislation will be introduced.
1.2M bpd of refinery capacity is still down. Americans are using 6% less gas than they were a year ago,or about 1.2M bpd less oil. Seems to me they might want to leave those refineries idled. Or have them refine something besides gasoline. 180M barrels of gasoline is a 2 1/2 week supply. With a refining shortfall of 1.2M barrels a day,we’d run out in 5 months or so. It’s not exactly panic time.
RR – I can confrim that both Alliance and Lake Charles refineries are running at full capacity now and that Sweeny is starting up and should hit full capacity in a few days.
Another factor in the rationing argument is that nearly all of the gasoline at the retail level is sold by small independent businesses. They buy their gas from a wholesaler.
Contrary to popular opinion there isn't much profit on retail sales, if a retailer buys a 10,000 gallon load of gas and guesses wrong on the price, he could stand to lose a lot of money. If he raises prices too much, he could get hauled into court to explain "price gouging". Better to let the pumps run dry than to take the risk.
In the old days when oil companies were vertically integrated, losses at the retail level could be offset by wholesale, refining, or E&P profits. Perhaps "Big Oil" wasn't so bad after all.
Again and again, it seems that our national policy should be to encourage EVs. Imagine if Texans-Southeasterners had EVs. It would be easy to charge up, drive lightly and avoid gas stations altogether for a few weeks.
Even so, this does not strike me as much of a crisis. A few stations without gasoline after back-to-back hurricanes? One station w/o premium gasoline?
And Maury is right: Are refineries close to being excess baggage? In the next five years, if American drive 10 percent less miles, and acquire a fleet that gets 10 percent more mpg, the amount of gasoline we use will drop by 20 percent.
There will be an out-and-out glut of refinery capacity, with those two modest changes.
If I owned a refinery, I think I would sell it right now. Especially as additional refineries are coming online worldwide (many of which are being geared to handle heavy crude).
Hmm, seems the other problem with first come / first served is that once stations start running out, a lot of gas is wasted driving to other stations and waiting in line. So between that and hoarding, it might make a nice increace in demand when supplies are low. No?
Hello. My name is Edgar and I’m an editor at OpposingViews.com, the debate website. Since we both cover energy and environmental issues, I thought I’d drop you a note. I would’ve e-mailed you but I couldn’t find an address.
See, we’re currently having a discussion about whether or not the U.S. should allow offshore oil drilling. You can see it here:
http://www.opposingviews.com/questions/should-the-us-allow-offshore-oil-drilling
Although vetted experts are the ones doing the debating, anyone can contribute by choosing a side and posting comments about the experts’ arguments.
Check it out and, if you have the time, let me know what you think at eacosta@opposingviews.com
Thanks!
Hi, Little change of topic here. Can’t seem to locate an e-mail address for you. I’m in Austin. I blog for Public Citizen at: texasvox.org. Ethanol bad, Solar good, Wind good–all that. I’m a little worried about this T. Boone Pickens plan going on here in Texas though. I don’t care if he’s using wind farms as a carrot to push through legislation that will facilitate his more lucrative goal of transporting water. What scares me is that he’s saying he wants to transport and sell “surplus” water from the Ogallala aquifer, and when I look up info about the aquifer I find articles and blogs from a couple years ago with words like “most-depleted” and “dustbowl”. Do you have any information about what might be potential effects of transporting massive amounts of water out of the Ogallala?
…sell “surplus” water from the Ogallala aquifer”
There is no surplus water in the Ogallala. It is being depleted faster than it can be recharged, and in 10-15 years will be another of those “Well, why didn’t someone warn us this could happen?” stories as the land above the Ogallala goes back to looking like the Dustbowl in the 1930’s.
Do you have any information about what might be potential effects of transporting massive amounts of water out of the Ogallala?
I was about to say “Dust Bowl”, but I see I was beaten to it. Seriously, I think we are at risk of making large sections the rely on the Ogallala uninhabitable in a few years. This is another reason corn ethanol gets under my skin so much. I reiterate that it is of the utmost stupidity to grow irrigated corn in Nebraska and turn that into ethanol.
Regarding the e-mail address, I keep it hidden to avoid the spam bots. You can find it by clicking on my CV in my profile.
Cheers, RR
Here in San Antonio this fear of being prosecuted for gouging is so strong stations are lowering prices. We’re now a dime below pre-Ike levels.
Gas SHOULD be below pre-Ike levels,since oil and wholesale gas prices have continued to fall. In my area,we’ve been paying $3.69 or so since oil hit $147 a barrel. One station dropped to $3.49 recently. The reason some stations ran out of gas,is because they didn’t want to pay the spot price,which went over $5 at times. Why would a station owner try to sell $5 gas,when the station supplied by an oil major across the street has $3.49 unleaded? The “fear of gouging” is overrated. At most,the owner has to fax a copy of his invoices. If his mark-up isn’t terribly out of line with his normal practices,he has nothing to fear. Once again,it’s not up to individual stations to balance supply and demand. Besides,if it looked like we might actually run low sometime in the next six months,we could always draw on emergency supplies from the IEA.
“Imagine if Texans-Southeasterners had EVs. It would be easy to charge up, drive lightly and avoid gas stations altogether for a few weeks.“
except when there were widespread blackouts, then it would not have been easy to charge up at all. Hmm… maybe more reason to get a PHEV or range extended EV. Diversification.
“At most,the owner has to fax a copy of his invoices. If his mark-up isn’t terribly out of line with his normal practices…”
Which leaves us with ‘first come, first served rationing.’ And who decides what ‘terribly out of line’ is? The owner is going to be very gun shy about letting the court decide whether he raised prices too much, so we will run out far faster than we should have had he been able to raise prices quickly (which also keeps hoarding at a minimum).
clee-
Yeah I know there are some blackouts…but rather limited geographically. People are experiencing shortages in Georgia, and the Carolinas, where the juice is on (no hurricane damage, obviously). Besides, with an EV, a driver has the option: Charge up and drive, or gas up and drive. (When I say EV, I mean the GM-Volt type.)
This is just so stupid not to make EVs a national priority.
We are spending $1 trillion in Iraq, and another tril on banks, but we can’t spend a couple hundred billion to accelerate our conversion to a national EV fleet (a conversion that would save us hundreds of billions in oil import bills, and would probably send oil prices back to $10 a barrel)?
benny cole: This is just so stupid not to make EVs a national priority.
You mean something like this?
BusinessWeek: “Chrysler Goes Electric“.
Yeah I know there are some blackouts…but rather limited geographically. People are experiencing shortages in Georgia, and the Carolinas, where the juice is on (no hurricane damage, obviously).
I read that there are gas shortages in Tennessee too. I was surprised that Tennessee had blackouts from the hurricane, despite being so far inland. But I’d hope that those blackouts are over by now, though I really don’t know if they are or not.
RR & Kim Jarrett – I first ran into Pickens folks buying water rights back in the early 1980s in the Panhandle when he was buying up water rights.
Texas law grants the surface land holder the rights to water beneath their property. Owners are limited to pumping 1 acre-foot per acre of surface land. Picken's company, Mesa Water, purchases unused or underutilized water rights from land owners with the goal of some day selling this water for higher end uses. The water is surplus in the sense that owners are not using their legal rights to the private property (water) they were granted. This is an entirely seperate question from whether there is adequate water in the aquifer.
BTW – 90% of the aquifer water used is for agricultural uses and a huge amount of that water goes into making ethanol. I'm not a big fan of Mr. Pickens but it is unfair to paint him as the bogeyman on water issues.
Robert,
You’ll enjoy this one. The U of Nebraska has released a study saying, “Moreover, if the goal is to reduce dependence on imported oil, we estimate that 13 gallons of ethanol are produced for every gallon of petroleum used in the production lifecycle for corn ethanol.”
Wow, a 13:1 ratio. I’d say that pretty much solves all of our energy problems, wouldn’t you? Just keep using ethanol to make more ethanol until it is running out our ears.
Look at this link under the September 23, 2008 news release:
Energy balance of corn-based ethanol even more favorable than early estimates
Don’t worry Benny,
Uncle Sam is getting ready to sign a $25b check (should we make it $50b?) on your behalf to bail out the… I mean invest in fuel efficient vehicle production, at the Detroit 2.8 only, of course.
Don’t get too exited, though. Remember Partnership for a New Generation of Vehicles, a joint effort by domestic automakers and the government to develop a 5-passenger car that gets 80 miles per gallon by 2004? Lots of tax dollars spent [check]. Goals achieved [uncheck].
Meanwhile Volt fans may want to consider the meaning of this development: Gas Engine Does NOT Recharge Batteries.
There is also this from Fortune magazine: Will the Chevy Volt save the world? Please! It isn’t even enough to save General Motors. Sobering thoughts.
Wanna bet that as the Volt launch date approaches, GM will suddenly start talking about hydrogen [angelic music in the background]?
“Several recent studies have made this abundantly clear,” he said, “including one at the University of Nebraska.”
Anyone know what research he’s talking about ?
Here’s Cassman’s UNL page:
http://www.agronomy.unl.edu/welcome/directory/cassman.html
RBM
Optimist and bill:
Yes, I think it is a national security issue to promote EVs.
The transfer of wealth to hostile nations, the weakening of our own economy, and the decrease in our leverage internationally due to imported oil — I think it is a clear case.
Sheesh, we spent $1 trillion in Iraq to establish a Shia government (not a secular government) that will form alliance with Iran, and that gave out its first big oil contract to Red China.
$25 bil for our own guys? You betcha.
I recommend $2 a gallon boost in the federal gasoline tax, and credits to buyers of EVs. But hey, “no new taxes” is the mantra, along with “I want my baby bottle now.”
“And who decides what ‘terribly out of line’ is? The owner is going to be very gun shy about letting the court decide whether he raised prices too much, so we will run out far faster than we should have had he been able to raise prices quickly”
A gas gouger is trying to get rich quick. Micro managing supply and demand is the last thing on his mind. It’s very simple. Someone who normally has a 5 cent mark-up,and now has a $2 mark-up when gas is in in short supply,is a scum bag gas gouger who belongs in prison. If “mom and pop” want to get rich quick during a crisis,they should speculate in the markets,where they stand a chance of losing the shirts off their backs. Stiffing people at the pumps is a rigged game.
“Yes, I think it is a national security issue to promote EVs.”
I’m with you Benny. Anything that lessens dependence on foreign fuel is worth backing imo. I know ethanol isn’t popular at the moment. But it provides the equivalent of 500,000 barrels a day of crude oil. That’s $50M less we’re handing thug regimes each and every day. If it raises the cost of a box of cereal a nickle,I can live with it.
Maury said: “But it provides the equivalent of 500,000 barrels a day of crude oil.”
Maury,
Really? Do you have any idea how many barrels of fossil fuels (or its equivalent in natural gas) it takes to produce an amount of ethanol that is the equivalent of 500,000 barrels of oil?
And considering the reduction in fuel mileage we get from that ethanol, it is no bargain ~ unless of course you are a corn farmer or own an ethanol plant.
It is easy to prove that burning E85 actually INCREASES total fossil fuel consumption.
Why are people upset that the Volt will not use the engine to recharge the batteries to more than the 30% charged level? It'll still recharge from regenerative braking, right?
If you recharge the batteries to 100% by using engine power, i.e. gasoline, then when you arrive at your destination and plug in the car, there will be no recharging to do, and you will not have saved any more gasoline than if the vehicle had been a non-plug-in hybrid.
I'd want the 40 miles of pure electric range to be charged from my solar panels, or (here in PG&E territory) natural-gas-fired-grid electricity. I don't want this 40 miles of supposedly pure-electric range to be actually charge from the gasoline-powered engine.
“Do you have any idea how many barrels of fossil fuels (or its equivalent in natural gas) it takes to produce an amount of ethanol that is the equivalent of 500,000 barrels of oil?”
We hear the same argument when it comes to solar. I’d still be for it,whatever the efficiency. We have to start somewhere. Ethanol plants will transition to cellulol plants soon enough. An argument can be made against every renewable out there,not to mention nuclear energy. That kind of thinking won’t get us anywhere.
“Ethanol plants will transition to cellulosic plants soon enough. That kind of thinking won’t get us anywhere.”
There is no connection between corn ethanol and cellulosic. That corn ethanol is a necessary “bridge” is one of the fallacious talking points that “Big Ethanol” likes to keep pushing at the media and the gullible public.
“I’d still be for it,whatever the efficiency.”
Why? That just digs us into a deeper hole. That’s like giving someone $1.25 so they can give you $1.00 in return and thinking you just got a deal.
“There is no connection between corn ethanol and cellulosic.”
Of course there is. Infrastructure can transition from ethanol to cellulol almost seamlessly. Farmers can use corn stover instead of corn. Ethanol plants can be converted. Refiners can blend cellulol the same way they do ethanol. I doubt there’d be much research into cellulosic fuel if we weren’t using ethanol now. Companies have to know there’s a market to invest that kind of money.
Cellulosic ethanol, if it gets anywhere, will be based on the Range Fuels process (gasification-alcolification). The process has nothing in common with corn ethanol. Even the product is different (mixed alcohols, including methanol, ethanol, propanol, butanol, etc.) You don’t have to be a rocket scientist to work out that once Uncle Sam gets off their backs, Range Fuels will optimize the process for maximum butanol, minimum ethanol.
Benny, EVs are impractical. That’s what killed the EV1. Of course, GM makes a convenient scapegoat, with their incredible inertia and incompetance. $25 billion? GM will burn through that in about two years (at current consumption) and then be back with the begging bowl. The Volt is a nice science project, it’s not going to change anything. It may one day lead to something else. But that day is way off in the distant future.
Why are people upset that the Volt will not use the engine to recharge the batteries to more than the 30% charged level?
Two reasons I can think of. (1) GM has so far promised the engine would charge the battery. (2) Don’t stop at the foot of a steep hill: with only 70 hp (compared to the normal 160 hp) available, it might take a while to reach cruising speed.
kingofkaty–I don’t want to make Pickens out to be anything. I’m just wondering if we should start asking to whom he’s planning to sell the water. Since he’s a businessman and all, I’m guessing he thought of likely buyers before sinking billions into the project. There were 9 ethanol plants under construction in the aquifer region last year. I just think we might need to ask now who he plans to sell this water to that is not already using it. Secondly, it seems to me that potential for converting corn ethanol facilities into cellulosic ethanol facilities is not a strong argument for corn ethanol. That’s like saying, “These gas chambers will make great showers later.” Thanks all for the aquifer input.
Kim – one of the potential customers is the city of San Antonio. He is also considering sending it to the DFW metroplex. As far as I know he isn’t considering it for industrial customers. One of the projects I’m working on needs a lot of water, but only about 5% of the volume he is talking about.
The area in question is the 4 most northeastern counties in the panhandle of Texas. I’ve driven through this area dozens of times. It is good range land for cattle, but not for crops. So the landowners would like to sell their rights. I don’t see what it would have to do with the Pickens Plan for wind energy.
kingofkaty–The articles at the links below seem to indicate it’s all about the water.
http://earth2tech.com/2008/06/20/t-boone-pickens-taps-water-wind-for-land-grab/
http://www.kauz.com/news/19017259.html
EDIT: Cassman
RBM
Kim – well that explains it, and why PC is interested. Tell Smitty hello.
Clee: Why are people upset that the Volt will not use the engine to recharge the batteries to more than the 30% charged level?
Optimist:Two reasons I can think of. (1) GM has so far promised the engine would charge the battery. (2) Don’t stop at the foot of a steep hill: with only 70 hp (compared to the normal 160 hp) available, it might take a while to reach cruising speed.
1. After the first 40 miles of pure electric range, the engine will opportunistically charge the battery up to the “customer depletion level of” roughly 30%, but not up to 100%.
2. At the foot of a steep hill, the Volt will provide more power than just the engine alone can provide. Though it does give me pause… how well will it do driving 50 miles up a mountain to go to the ski resort?
A GM-Volt site points out that Edmunds was wrong,
http://gm-volt.com/2008/09/27/how-charging-of-the-battery-works-in-the-chevy-volt/
They got some quotations from Volt chief engineer Andrew Farah
http://gm-volt.com/2008/08/25/what-happens-in-the-chevy-volt-past-the-customer-depletion-point/
Farah: So you say, how come you don’t have performance problems if you’re trying to go up a hill with only basically half the power capability? That’s where the battery comes back into play. Because the customer depletion point is not full depletion, there’s still energy available. That’s by design. The idea is during certain other peak situations such as climbing a hill or merging into traffic, you will actually take some more energy out of the battery. So you may actually come down a little bit below customer depletion level.
And then when you take your foot off the gas, as an example when you’re done doing the merge, we had taken a little bit out and the battery has a little less in it. So what we’ll do then is we will opportunistically put that energy back into the battery either through regenerative braking or if we have to we will take some of the energy that’s not needed to turn the wheels and bring the battery up to the customer depletion level.
“Of course there is. Infrastructure can transition from ethanol to cellulol almost seamlessly. Farmers can use corn stover instead of corn. Ethanol plants can be converted.”
Maury,
The true benefits of cellulosic won’t even be ethanol. As Optimist pointed out so well, the direction of celullosic is gasification, then conversion of the resulting gas to a liquid fuel. However that liquid fuel is unlikely to be ethanol. Butanol ~ and even gasoline ~ are now more likely possibilities.
Please don’t fall into the “farmers can use corn stover” trap. Stover is a necessary nutrient for the health of a field. Any scheme that strips a corn field of its stover will quickly result in dead soil. The soil will then be nothing more than a sterile matrix that holds the corn seeds while the farmers have to pour on more and more nitrogen fertilizers to even get a crop.
Ethanol plants can be converted? No, not really. Distillation is a simple, centuries-old process. The equipment and process for gasification/liquidation of cellulosic material is completely different. It would be cheaper to build a new cellulosic plant from scratch than to convert an existing corn distillery to cellulosic.
Sorry, but corn ethanol is no “bridge.” It was little more than a scheme to increase the commodity market for corn and to transfer subsidies* to “Big Ag,” “Big Corn,” and “Big Ethanol.”
~*~*~*~*~*~*~
* Never forget, one person’ subsidy is another person’s tax.
The problem is not government intervention, but unintelligent government intervention.
Our leaders should have a comprehensive plan to get us off of oil, and the first thing to do is let the gas prices go as high as the market will bear, but make a price floor of $4.
This will insure the developers of efficient vehicles will have a robust market, and make it easier for them to find investors, as well as allowing better mass transit planning.
The problem of low income folks not being able to afford gas can be handled like a food stamp program.