Gas shortages


Well, I posted a message similar to this one in the Katrina discussion, and here we go again as Rita makes landfall on Port Arthur, Beaumont, and Lake Charles. Here's a list of the top refineries in the nation:

It looks like extensive flood-related damage could occur to 4 of the top 20 refineries, including #5 ExxonMobil's 348,000 bpd plant in Beaumont. The other three are #9 Citgo in Lake Charles, LA, #12 Motiva in Port Arthur, TX, and #17 Premcor in Port Arthur, TX. Combined output for these four refineries is 1.2 million bpd. I'm assuming they would remain offline for a significant amount of time being so close to the coast and in nearly the direct path of Hurricane Rita's landfall. What's amazing is Katrina and Rita each took their pick of the Top 20 refineries and knocked out a good number of them, all in the space of three weeks!

So the big question is, how long will Dallas (where I now sit surrounded by empty gas stations) have enough gas to support our population as well as the large influx of evacuees? As of Friday evening, only a few stations in this area had any gasoline left at all. Some stations earlier in the evening were being resupplied with tankers, so yes there will always be some supply somewhere, but with everyone buying it up this could present some interesting challenges to Dallas in the coming work week. Anyone want to take a guess at the impact here and across Texas?

As for the rest of the country, I expect more "rolling brownouts" of supply similar to what happened with Katrina. How long that lasts depends on the extent of the damage and other countries' willingness to bail us out (again). Think it's time to start building some new refineries!

We'll probably know the extent of the damage to the rifining facilities later today. Beaumont has had a north wind most of the night which might help limit the surge there, but, just to the east the winds are from the east pushing water in the direction of the city. I'm more concerned with Port Arthur which is now getting smacked with the northwestern eyewall. Plenty of water to move into that town. There are a few refineries in the Lake Charles area but I would assume these are relatively higher in elevation.

Good point about all the gas being sucked dry in Big D as well as much of eastern TX. It will take some time to replenish the supply. If the stations limited sales to 10 gallons then there would be a little more to go around. If we allowed the free market to adjust short-term prices than it would cost $5+ per gallon down there but in that situation nobody would be hoarding the stuff and people would use it sparingly. What some folks call "price gouging" I call "conservation". High gas prices mean we have gas. If the stuff was still $1/gal then demand would exceed production. Maybe I'm one of the few who use the logic that I'm very happy paying $3 or $4 for gas during a North Dakota winter knowing full well I will at least have the option to consume it when I really need it. This is classic economics: higher price - lower demand. We now know the price of gas is not perfectly inelastic. Note that I'm playing a little DA here...I'm not saying a company should necessarily profit from a mandatory evactuation. Then again, if folks wait until the last second maybe they should pay a premium. Advance tickets are usually cheaper.

One fear is the possibity of natural gas shortages this winter. Much of the GoMex production is shot and this accounts for about 25% of the domestic supply if I heard correctly. There were some analysts on CNBC addressing this concern. If your house is heated with natural gas than you can expect to pay double this winter. Maybe big houses will go out of style when the bills come due in February. I can see it now: mortgage - $1000, heating bill - $600.
Why are energy prices up HERE?

I don't mean to minimize the extent of the damage that may be revealed in Rita's wake, but I have trouble understanding one thing.

I live in Cheyenne, WY, far from the direct path of Rita, and far from the refineries being affected by this storm. Here in Cheyenne, we have a gas refinery that refines crude oil produced in this region. THIS crude does not cost any more to produce because of the hurricane damage, nor does THIS refinery's gas cost any more to produce. Why then should the price of gas in Cheyenne, WY be higher than the national average?

I just don't get it. I could understand if our crude came from the Gulf or if the distribution cost of this gas suddenly increased dramatically, but this is LOCAL gas. There is NO WAY that costs have increased 15-50% in the wake of these two large storms in the Gulf of Mexico. Why then should the retail price of OUR gas be this much higher?

There MUST be price gouging evidenced here, right?

There is talk of our other energy costs going up as well. Our electricity is generated by coal mined here in Wyoming. Again, production costs should not have changed as a result of any storm in the Gulf. Why then should our electricity producers' production costs increase, and why should the retail cost of our electricity go up by 20%, as the electric company would have it?

Finally, more of the nations natural gas comes from Wyoming than any other single state. The hurricanes, though devestating to the Gulf Coast, have had absolutely NO AFFECT on the cost to produce the natural gas here in Wyoming. Why then should retail natural gas prices here in Wyoming go up AT ALL?

We are getting a raw deal here in Wyoming. Someone is taking advantage of us using these terrible storms as an excuse. This should not be allowed to go unchecked.

Perhaps Wyoming should consider an energy sector "windfall profit" rebate to the residents of Wyoming similar to Alaska's! I am not sure which branch or department in our state government should look into this, but SOMEONE needs to give the people of Wyoming the strait story. We, the people of Wyoming, need to hold someone accountable.
Re: Why are energy prices up HERE?

Originally posted by Guest
I just don't get it. I could understand if our crude came from the Gulf or if the distribution cost of this gas suddenly increased dramatically, but this is LOCAL gas. There is NO WAY that costs have increased 15-50% in the wake of these two large storms in the Gulf of Mexico. Why then should the retail price of OUR gas be this much higher?

There MUST be price gouging evidenced here, right?
Who owns the refinery? Chances are that it's a company who just took a hit in the Gulf. Therefore, their costs just went up and they are going to even that out across the board, not just jack the people on the coast. Makes sense to me. But I could be wrong. The refinery owners may be local and have no interests in the Gulf.
Actually, if the company is not associated with those who one the refineries in the Gulf region, then their prices would likely be higher even without the hurricane. It's all basic economics and responds to supply and demand in the end. The same reason a local grocery store cannot beat the prices of the produce at a store such as Walmart.

I know, either way it hurts the pocket book.

If the issue is why Wyoming is more expensive than the rest of the country, maybe it has to do with economy of scale... being that demand in that area is lower so maybe it costs more to produce whatever commodity the refineries are selling..

Good news in Dallas today, we have some gas! I was surprised to see that most of the damage in Port Arthur and Beaumont was wind-related instead of flood related. Lake Charles may be a different story. Maybe these back to back storms will make us reconsider an energy crisis that's been building under the surface for years. A crunch was bound to happen at some point. Time to start planning now for the inevitable hurricane that slams Houston with its northeast quadrant, assuming the government and private sector will have reacted by then. :roll: