Energy investment banker, author takes stock of U.S. gasoline inventories and finds problems ahead.
Open Access Article Originally Published: May 15, 2007
Here is a quick run down on the possible disaster we face this summer as we head into Memorial Day with the lowest beginning-of-driving-season stocks in US history. It would have been convenient had someone found out exactly what Minimum Operating Levels* really have become. I suspect we will answer this riddle this summer.
Minimum Operating Levels of petroleum inventories are when all cushions have been used up and the system is now starting to “rob Peter to pay Paul." At this stage, the risk of shortages starting to crop up is Red Alert. Sadly, the last serious study of where this invisible line of minimum stocks is was a NPC study done in 1988.
The reality of gasoline demand is that it will rise during July and August unless we have some roads blocked off to stem demand. Rising late-summer demand has happened almost every year, even as prices rose from $1/gallon to over $3!
To supply this market, several things have to work in unison.
- Refineries need to crank up to over 16 million b/d instead of current 15 as they struggle to get into compliance from too little maintenance for too long.
- Imports need to average well over 1 million b/d, and probably need to hit 1.5 million b/d, matching the all-time record set last year.
- No hurricanes can hit the Gulf producing region.
- Stock draws are the last plug in the dike.
From the looks of things as we view Memorial Day weekend starting in just over a week, we fail on all four counts. The burning question is how much lower stocks can drop before shortages sweep our fragile gasoline supply system. Historically, it has been critically important that we build up gasoline stocks during the spring shoulder season (April-May) so that they can be liquidated during peak demand to prevent shortages. We seem to have run out the clock to fix the problem this summer.
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6 comments so far...
01-Jul-2007
56914
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It's July 1 and gas prices are down from the spring. Not so bad.
Posted by: Rick James
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18-May-2007
56246
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A few things need to be put straight. At first a higher mpg doesn’t mean a restriction on driving freedom; it simply means the car is more efficient at converting the fuel into vehicle movement. Second, a price of 3 $/Gallon is seen as expensive in the US but in the UK it would create a suspicion on the fuel quality because the normal price is 7 $/Gallon there; that’s more then double. So 3 $/Gallon is extremely cheap. That price means no or almost no taxes, no account for CO2 emission what’s however, no pre for securing the oil flow through military means that are paid by taxpayers and not by the gasoline users. These people are not necessarily the same ones and it certainly means that the ones that have high mpg cars are paying as much as the ones that keep driving gas-guzzlers. A clear abuse where the polluters get subsidized and the good willing get nothing.
Posted by: Patrick Leonard
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22-May-2007
56305
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The electric car revolution is upon us:
join us at http://www.allcarselectric.com
Posted by: J Davis
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16-May-2007
56233
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To make public transit more pleasurable and remove the requirement that autos must be the only mode of access change zoning codes throughout the entire state to require all new buildings be built with 15 feet of street access. This will make buildings accessible to public transit, bicycles or walking. Shopping centers and offices can still offer as much parking as they want behind or aside the building. Gas stations would be exempt. This will also compact cities saving outer areas for porential green belts.
Posted by: Peter Taylor
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17-May-2007
56236
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I love expensive gasoline for the same reason I love seeing Paris Hilton put in jail. The petulant child that is the American motoring public is finally getting some medicine
Posted by: Larry Rose
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09-Aug-2007
57558
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It's August 9 and gasoline in the San Francisco area fell below 3 dollars a gallon for the first time in a long while.
I think Matt Simmons has no better idea of how gasoline supply and prices will go than I do.
Posted by: john
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