Are More Gas Shortages Ahead?

The ongoing financial crisis has been good for one thing:  It's taken our minds off the fact that we could be facing gas shortages in the very near future.  Even though gas prices have stabilized and even dropped, the long lines in Atlanta after the recent Hurricanes Ike and Gustav are proof that there might be a nationwide gas shortage.

Natural disasters are unavoidable.  You might be able to predict that a hurricane is heading your way, but there's nothing you can do to prevent it from causing widespread destruction.  However, if you neglect certain variables that are within your control, like gas inventories, a natural disaster will only make a bad situation worse.

Hurricanes:  The tip of the iceberg

During the last week of September, long lines for gas sprang up in the South, particularly in Atlanta.  A city heavily dependent on its commuting infrastructure, Atlanta found itself in a panic after Hurricanes Gustav and Ike blew through the Gulf of Mexico.  

The hurricanes inflicted serious damage to the Gulf's oil and drilling refineries.  Ike did the most damage, causing serious power outages in the Galveston and Houston areas.  The damage crippled production at six refineries in the Texas City and Port Arthur areas, where production of 1.6 million barrels a day came to a dramatic halt.

Huge gas lines soon became commonplace throughout the South, the likes of which had not been seen since OPEC turned off the spigots back in the '70s.  The storm's aftermath highlighted a larger overall problem:  U.S. gasoline inventories are perilously thin.

Over a barrel

According to industry analysts, our current gasoline inventory is reaching low points not seen since 1967.  Inventories are right around 180 million barrels, more than 20 million barrels below the five-year average.
Industry experts point out that we're operating on a just-in-time inventory basis.

Despite increases in gas prices over previous years, it looks like demand will continue at its current level, and will probably rise in line with increases in population.  If another natural disaster occurs, we could face a serious shortage.  The temporary loss of six refineries cut off supply lines to much of the South, crippling economies and bringing life to a standstill.  One shudders to think what would happen if more refineries were damaged and shut down.

Experts also note that, even if the refineries were restored and returned to their current level of production, the problem wouldn't go away.  Refinery output would drain existing supplies of crude oil, and we wouldn't be able to replenish the diminished supply of gasoline.

A global economic crisis is hard to take, but if a gas shortage were added to the mix, our economy might suffer a knockout punch.  For now, we can only cross our fingers and hope that existing refineries can add to our current fuel inventory.  The need for alternative fuels and/or more refineries is becoming quite apparent.  If something isn't done soon, the victim of the next hurricane might be our economy.