The Risk of Maintaining Low Inventories

All through the spring and early summer I kept pointing to falling gasoline inventories as a potential problem. Running inventories down to very low levels greatly increases the risks associated with any supply disruptions. And while inventories have been recovering, they are historically still very low. And we have our first real casualty of running on such a razor’s edge:

Some Gas Pumps Run Dry

OMAHA, Neb. — Truckers spent more than an hour waiting to fill up with fuel for delivery as some gas pumps ran dry across the state on Wednesday.

Nebraska’s governor has issued an executive order that will allow gasoline truck drivers to alter their hours of service.

Gas supplies in the state have been tight after flooding in Kansas last week. Industry experts said high waters submerged a Coffeyville, Kan., refinery and waters could keep the 108,000-barrel-a-day facility shut down for most of the summer.

That’s one of those supply disruptions that I was talking about. I was more worried about a hurricane, but any accident or natural disaster that takes a refinery out of service in this tight market has the potential to cause shortages.

Truckers lined up at 2205 N. 11th in Omaha, one of the depots where fuel is loaded up and distributed to the filling stations. The Magellan Petroleum Terminal had waits of more than an hour on Wednesday.

There was no fuel at some other area terminals, including one in Lincoln.

“They’re running out up north, so they’re coming down here or taking it from here up there,” said Wynne Transport Service’s John Neff.

Some gas station owners told KETV NewsWatch 7 that they worry this temporary slow down not only leads to higher prices but could leave them without fuel for periods of time. At least three stations around the state have already run dry. Stores in Kearney, North Platte and Doniphan reported being out of gas for a short time.

I thought it was kind of funny when people were predicting that this refinery outage might cause prices to go up by 1 or 2 cents. Maybe when inventories are full and utilization is high, but not now. And Nebraska is going to be lower on the priority list for gasoline coming out of Kansas.

8 thoughts on “The Risk of Maintaining Low Inventories”

  1. (Sarcasim Alert)

    Don’t you know that shutting down the Coffeyville Refinery is just a pretext for raising gasoline prices? ExxonMobil, Dick Cheney and Halliburton cranked up the secret weather machine and made it rain 12″ in 12 hours in Montgomery County Kansas. Prices were coming down and we just couldn’t have any of that!

    The diabolical part of the plan is that they chose a small independent refiner to knock out this time, thus ensuring profits at the majors. (end of sarcasim alert)

  2. The H3 ad cracked me up with the “Get even closer to nature (in your Hummer) with the sunroof option” tag line.

    If the universe was just and true, everytime some idiot in a Hummer opened the sunroof in the woods, a bear would fall out of tree into it.

    1200 lbs of surprised bear in the passenger seat would get them real close to nature.


  3. You hyave to back in ethanol. It is added into gasoline supplies, but not counted. I think ethanol now about 3 percent of US gasoline supplies If so, that brings us into five-year average range right now. Soon, within two years, ethanol will make up 6 percent of US gasoline supplies.
    I would also be suspicious of seasonal adjustment factors. It looks to me like they are out of whack.
    That bing said, US consumers, evidently, will buy all the gas they can use at under $4 a gallon, although high mpg cars are selling well. At more than $4, I think we see serious mood shift.
    On the other hand, you really cannot blame consumers for being “rational.” Until recently, a gallon of gasoline was cheaper than at any time since the 1960s. We simply will not tax gasoline like we should.
    By the way, accorfing to the Energy Blog, E3 has their new generation, cattle dung and corn stalk fired ethanol plant up and running. Also, a 100 mgpd ethanol plant going in Georgia, which will use heat to convert wood chips into ethanol. No enzymes.
    If world fossil oil production really rises to 95 mbd by 2012, we are going to have a glut. Small additional demands for liquid fuel from here on can probably be met through conservation and biofuels.
    At more than $60 a barrel, we are seamlessly transitioning to a post-fossil economy, with cleaner air and less wealth being transferred to those bastas in OPEC.
    How is this bad?

  4. “If the universe was just and true, everytime some idiot in a Hummer opened the sunroof in the woods, a bear would fall out of tree into it…”

    Complete and utter fantasy.

    We all know that Hummers never actually go into the woods. 🙂

  5. Catching up on blogs, TOD and R-squared …

    I filled up the 11th in Lincoln NE and paid $3.39/g. And I just started a ~52 mile round trip commute for an 18 month retraining program.

    On the bright side … I found gas !

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