North American Fuel Shortage Reports

[Dajm]

AirlinePilot said:

Im not 100% positive but I thought I have seen here that SA and some other large producers have very big storage throughout the Carribean.

I’ve also heard similar conjecture from various sources, but none of them were credible enough to quote. The only problem that I have with this, is that, gasoline is difficult to store in large quantities for extended periods. Maybe rotating the stock would work, I don’t know? Does anyone else here have any information on the subject of Caribbean storage.

Well, if there is a storage, now at least it is a perfect target for al-quaida.

[DantesPeak]

AirlinePilot said:

Im not 100% positive but I thought I have seen here that SA and some other large producers have very big storage throughout the Carribean.

I’ve also heard similar conjecture from various sources, but none of them were credible enough to quote. The only problem that I have with this, is that, gasoline is difficult to store in large quantities for extended periods. Maybe rotating the stock would work, I don’t know? Does anyone else here have any information on the subject of Caribbean storage.

This is a summary from memory. There is in fact some storage facilities for gasoline in the Caribbean. I believe it may be as much as 12 million barrels. To the best of my knowledge, the storage up until mid-2006 was different blends of gasoline (such as being mixed with MTBE) and not the RBOB standard now. So basically the inventory was liquidated last year to make way for the new standards.

Could they have rebuilt the entire inventory in one year? I doubt that, but yes, there could have been a few million barrels or so of inventory built over the last year.

PS - Please don't ask me to prove or otherwise verify this, but I did make some prior posts in 2006 about this with attribution to media sources.

[shortonoil]

DantesPeak said:

This is a summary from memory. There is in fact some storage facilities for gasoline in the Caribbean. I believe it may be as much as 12 million barrels. To the best of my knowledge, the storage up until mid-2006 was different blends of gasoline (such as being mixed with MTBE) and not the RBOB standard now. So basically the inventory was liquidated last year to make way for the new standards.

Could they have rebuilt the entire inventory in one year? I doubt that, but yes, there could have been a few million barrels or so of inventory built over the last year.

PS - Please don't ask me to prove or otherwise verify this, but I did make some prior posts in 2006 about this with attribution to media sources.

Well, I don’t know a lot more than I did before, but at least now, I have a credible source to quote. Thanks Dantes.

[DantesPeak]

Kansas issues warning of possible upcoming diesel shortage before the harvest season of higher demand:

Full fields, empty tanks
BY PHYLLIS JACOBS GRIEKSPOOR
The Wichita Eagle
Diesel shortage could hinder wheat harvest

Forget about high fuel prices. As harvest nears in western Kansas, the bigger concern is fuel supply. "I'm telling our producers to get their tanks full," said Pat Peterson, general manager of the United Plains Ag cooperative in Sharon Springs. "Supply is more important than price."

A shortage of diesel fuel supplies is the result of a combination of weather and maintenance problems at refineries and terminals in the region that have caused slowdowns in production and problems with delivery.

Storms the weekend of the Greensburg tornado severely damaged the loading rack and two above-ground storage tanks at the Magellan terminal near Great Bend.

Refinery problems in Colorado and Oklahoma have caused a short supply of fuel, leaving the Magellan terminal near Scott City -- which supplies most of the cooperatives in an 80-mile radius -- short of fuel. Problems in eastern Colorado have sent producers there into Kansas looking for fuel, putting further pressure on supplies at Scott City.

The most disturbing aspect of the current situation is that terminals are running out of fuel and the lines are long -- and harvest has yet to begin.

Wichita Eagle

[shortonoil]

The most disturbing aspect of the current situation is that terminals are running out of fuel and the lines are long -- and harvest has yet to begin.

The image of crops rotting in the fields, not being harvested for lack of fuel, is certainly a scary one; I’ll have to cut back on my readings of Kunstler, Duncan ... etc.

[Twilight]

"Supply is more important than price."

"It's a scary thought to think about combines or trucks at the side of the field waiting on fuel."

Ting-Ding!

Two 1-litre bottles of pure grain alcohol to the winners! Someone gets it!

Nice article by the way. Sad, but important.

[DantesPeak]

The most disturbing aspect of the current situation is that terminals are running out of fuel and the lines are long -- and harvest has yet to begin.

The image of crops rotting in the fields, not being harvested for lack of fuel, is certainly a scary one; I’ll have to cut back on my readings of Kunstler, Duncan ... etc.

Cheer up, you'll be able to get diesel and read Kunstler at 2AM, at least for now:

"If they get here at 2 in the morning, they can probably move right through," he said.

[shortonoil]

10:12 EST 06/14/07
NYMEX NYH RBOB Gasoline up .0317

It looks like the traders finally took off their rose colored glasses.

Anyone got a guess on how high gasoline will get, before the shortages appear? My shot at it - $4.50.

[DantesPeak]

10:12 EST 06/14/07
NYMEX NYH RBOB Gasoline up .0317

It looks like the traders finally took off their rose colored glasses.

Anyone got a guess on how high gasoline will get, before the shortages appear? My shot at it - $4.50.

This may be off topic, but before any shortages (except isolated citywide ones) my WAG is the highest average price in the US will be about $3.50. However once we move to a regional (multi-state) shortage the price may rise fast at the retail level – up to $1 more in about two weeks in affected areas.

It will be interesting to also see if diesel shortages develop around harvest time this late summer/early fall – as refineries seem to be producing as much gasoline as possible, and less diesel.

[AirlinePilot]

This is the same problem we ha after katrina with gasoline and diesel production. Diesel was lowered and resulted in a significant cost increase for it over gasoline. I see the same thing happening this time and the trucking industry and farming are going to feel it. This time its not due to a short term crisis and that is different.

[Eli]

I think you are right AP.

With the supply situation like it now stands the are some scary prospects out their.

A major Hurricane hitting anywhere inside the GOM has the potential to shut down everything.

A little bad luck and literally this September Kansas farmers may not be able to bring in their crops because of a lack of fuel. That will be when people start to panic.

[Tanada]

I just had a thought, is anyone still manufacturing MTBE? IIRC the stuff is manufactured from Natural Gas and can be used in quite high concentrations. Any states that still use MTBE should be at an advantage in a shortage because they can up the percentage as fast as they can manufacture the stuff to the max allowed by car companies, something like 15% or 20% of the gasoline by volume. That would streatch supplies accordingly wouldn't it?

[Tanada]

I just had a thought, is anyone still manufacturing MTBE? IIRC the stuff is manufactured from Natural Gas and can be used in quite high concentrations. Any states that still use MTBE should be at an advantage in a shortage because they can up the percentage as fast as they can manufacture the stuff to the max allowed by car companies, something like 15% or 20% of the gasoline by volume. That would streatch supplies accordingly wouldn't it?

[DantesPeak]

I just had a thought, is anyone still manufacturing MTBE? IIRC the stuff is manufactured from Natural Gas and can be used in quite high concentrations. Any states that still use MTBE should be at an advantage in a shortage because they can up the percentage as fast as they can manufacture the stuff to the max allowed by car companies, something like 15% or 20% of the gasoline by volume. That would streatch supplies accordingly wouldn't it?

I am not an expert on this, but there still is some limited use of MTBE in the US. Outside of the US, it is still being produced in quantity for some countries.

I suppose in an emergency, MTBE could be produced or imported - but maybe not because of the corrosion problems storage tanks would have if they were not built for MTBE.

Gas Shortage Leads to Empty Pumps

For most of us, rising prices have been the major concern when it comes to gas. But on Friday, it was a different problem plaguing some Sioux Falls drivers.

As people pulled up to a gas station is southeast Sioux Falls, they were greeted with signs they didn't expect. Stations out of gas because of a shortage.

Gas terminals are empty across South Dakota. From Sioux Falls to Yankton to Sioux City, they are all out. And tankers cannot find anywhere to fill up.

"More so this summer it seems and they're saying it's supposed to get worse before it gets better but there's just not enough fuel coming down the pipeline into the delivery system," said BP owner Shane Oien.

KSFY

[shortonoil]

DantesPeak quoted

Gas terminals are empty across South Dakota. From Sioux Falls to Yankton to Sioux City, they are all out. And tankers cannot find anywhere to fill up.

I was going to do some work on my book, and here I sit, completely unable to dismiss this report without replying.

A few days ago, I posted that LOI was not just a function of inventory, but also the rate of consumption. That is, 185 mb of inventory may be adequate when Product Supplied is 9.0 mb/d, but could be insufficient at 9.1 mb/d. This is derived from the application of simple Queuing Theory models and gives us at least a guideline to go by.

We saw some shortages appear at 193 mb, and now we are seeing shortages appear at 201 mb (though, even the EIA admits that this may not be correct). Inventories in some areas have obviously dropped below critical threshold levels, and this has occurred while national inventories were well above the theoretical minimum levels. The question is, can all areas of the country be supplied adequately, even though national levels are sufficient. I would say, probably, no.

Our plunge to 193 mb several weeks ago depleted regional inventories, and from this point on, unless demand is substantially curtailed, no amount of additional supplies on a national level will be able to restock those areas. As long as demand stays at its present level, the national supply system can not maintain adequate regional inventories to prevent periodic shortages from appearing around the country. We have not reached the LOI inventory part of the function, but we may have reached the rate of consumption limit.

Also , the summer driving panic is just beginning!

[DantesPeak]

DantesPeak quoted

Gas terminals are empty across South Dakota. From Sioux Falls to Yankton to Sioux City, they are all out. And tankers cannot find anywhere to fill up.

I was going to do some work on my book, and here I sit, completely unable to dismiss this report without replying.

A few days ago, I posted that LOI was not just a function of inventory, but also the rate of consumption. That is, 185 mb of inventory may be adequate when Product Supplied is 9.0 mb/d, but could be insufficient at 9.1 mb/d. This is derived from the application of simple Queuing Theory models and gives us at least a guideline to go by.

We saw some shortages appear at 193 mb, and now we are seeing shortages appear at 201 mb (though, even the EIA admits that this may not be correct). Inventories in some areas have obviously dropped below critical threshold levels, and this has occurred while national inventories were well above the theoretical minimum levels. The question is, can all areas of the country be supplied adequately, even though national levels are sufficient. I would say, probably, no.

Our plunge to 193 mb several weeks ago depleted regional inventories, and from this point on, unless demand is substantially curtailed, no amount of additional supplies on a national level will be able to restock those areas. As long as demand stays at its present level, the national supply system can not maintain adequate regional inventories to prevent periodic shortages from appearing around the country. We have not reached the LOI inventory part of the function, but we may have reached the rate of consumption limit.

Also , the summer driving panic is just beginning!

Great point and well put.

Ironically, the recent decline in gasoline prices has contributed to a reduction of gasoline imports - and therefore actually increased the chances of shortages as summer moves along. The realization of possible impending shortages has spread beyond the pages of PO.com and similar web sites to energy analysts - although I don't think the public will get it until they pull up their local station and see the spray-painted signs on plywood that say "NO GAS".

OsterDowJones
Dow Jones & Company, Inc.
June 15, 2007

DJ OIL FUTURES: Nymex Crude Tops $68, Nine-Month High

Jun 15, 2007 (Dow Jones Commodities News via Comtex) -- By Masood Farivar

OF DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Crude oil futures shot above $68 a barrel Friday, setting a new nine-month high on growing anxiety over tight U.S. gasoline supplies and a flare-up in Middle East violence.

The advance extended a rally that started Wednesday after the Department of Energy reported an unexpected decline in U.S. refinery utilization last week and said gasoline stocks remained flat at the start of summer, bucking market expectations.

"The focus has shifted back to fears of a shortage for gasoline," said Mike Fitzpatrick, an analyst at Man Financial in New York. "I imagine as we get to August and September, if stocks remain tight, it's going to affect prices."

The takeover of Gaza by the militant group Hamas, while not a threat to oil supplies in the region, "is going to bring in oil as part of the play" in the broader Middle East, Fitzpatrick added.

6/15/07 Oster Dow Jones 17:04:59
[sorry no link possible]

[shortonoil]

Dantespeak quoted:

The focus has shifted back to fears of a shortage for gasoline

Even though this is being duly ignored by the media, it is the kind of information that will eventually sieve its way out to the general public. Once it becomes generally known that it is possible, and hoarding commences, we will begin to have serious problems.

[EarthAbides]

A quick look at the EIA import/export data shows that Mexico is the single largest recipient of finished gasoline, in the neigborhood of 1 million barrels per week. If shortages begin to hit hard in the US, does anybody think that the DOE might limit the export of gasoline to Mexico? Would this be possible under NAFTA? What kind of prices might be required to price a significant number of mexican consumers out of the market? I'm wondering if we might start to hear reports of widespread shortages there before in the US.

[DantesPeak]

A quick look at the EIA import/export data shows that Mexico is the single largest recipient of finished gasoline, in the neigborhood of 1 million barrels per week. If shortages begin to hit hard in the US, does anybody think that the DOE might limit the export of gasoline to Mexico? Would this be possible under NAFTA? What kind of prices might be required to price a significant number of mexican consumers out of the market? I'm wondering if we might start to hear reports of widespread shortages there before in the US.

There are three reasons why I think Mexico will get all the gasoline imports it wants from the US, at least until 2010:

1. NAFTA - my (perhaps flawed) understanding of NAFTA is that Mexico can get all the gasoline imports it wants, as well as all the natural gas imports it wants.

2. Oil exports to the US - Mexico is still sending much more oil to the US than it gets back in gasoline.

3. Ownership - PEMEX has some ownership interests in US refineries.

The main reason they could still have shortages first is price controls (keeping prices low), and lesser efficiency in their energy markets.

[shortonoil]

EarthAbides said:

A quick look at the EIA import/export data shows that Mexico is the single largest recipient of finished gasoline, in the neigborhood of 1 million barrels per week. If shortages begin to hit hard in the US, does anybody think that the DOE might limit the export of gasoline to Mexico? Would this be possible under NAFTA? What kind of prices might be required to price a significant number of mexican consumers out of the market? I'm wondering if we might start to hear reports of widespread shortages there before in the US.

A very good question, one I have pondered myself and I hope DantesPeak can add some additional insight. There are two factors here; One: Mexico is one of the US’s larger suppliers of crude. It might be a little touchy to cut off their gasoline supplies. Two: Mexico doesn’t subsidize its gasoline as much as other Latin American countries, so price increases should have a significant effect on their consumption - reducing their demand for imports. Also, much of our oil from Venezuelan comes to us via pipeline, through Mexico. Cutting off their gasoline supply could have a bad backlash effect. I would think that exports may be reduced to Mexico in case of an emergency; stopped completely, I doubt.