Saturday, September 27, 2008

Gas shortages: get ready for more

NEW YORK (Fortune) -- While Congress and Bush administration officials have been working to complete a bailout plan and stem the financial contagion on Wall Street, a different kind of economic crisis emerged across the South this week: A severe, hurricane-related gasoline shortage has curtailed trucking from Atlanta to Asheville, N.C., and created a wave of panic buying among motorists.

The return of gas lines has largely flown under the radar of politicians who are usually keenly attuned, because their constituents are, to what's going on at the pump. But more of the Capitol gang should be paying attention to this. (Now isnt that a novel concept, Congress is not paying attention to the reality their constituents have to deal with on a day to day basis. I wonder what they ARE paying attention to? Or perhaps the question should be: who is paying them how much for their attention?)

That's because nationwide our gasoline inventory is shockingly low. Liquidity must be restored soon to this market, or we could be facing a crippling run on the gasoline bank. And if you think Americans are outraged about Wall Street, wait until their Main Street grocery store doesn't get the bread and milk delivery for a week or two. (This sounds a lot like the fear mongering sermon one would expect to hear at a fundamentalist revival, different issue, but the same style of rhetoric. " Accept Jesus as your savior before it is too late")

In Georgia, Gov. Sonny Perdue got a waiver from the Environmental Protection Agency to temporarily allow stations to sell high-sulfur gasoline. … In Alabama, Gov. Bob Riley ordered a state of emergency to prevent price gouging by station owners that do have gas. (One can always count on a crisis to bring out the best, and the worst of human nature. Why is it that the worst always gets the press coverage?)

But while the current shortages can be traced directly to the two hurricanes, the severity of the problem points out a bigger issue: The U.S. has been operating for a while with razor-thin spare gasoline capacity.

None of this surprises industry watchers such as Matt Simmons, the chairman of Houston energy industry investment bank Simmons & Co. and chief spokesman for the Peak Oil movement. I recently wrote a profile of Simmons for Fortune and I can report that he has been warning about the potential of gasoline shortages in the U.S. for months. (No doubt he has, but why haven’t we heard about it? Why weren’t our elected officials at all levels anticipating the problem and taking steps to minimize the impact? Anyone having flashbacks to New Orleans?)

"Our system is so fragile," he told me recently. "All you need is a tiny change to go from 'Oh, we're in fine shape' to an unmitigated disaster." (That is one of the dangers of the “just in time inventory” philosophy that businesses have been operating under for several decades. “Just in time” is basically order the raw materials so that they go directly off the delivery truck into the finished product. Among the benefits, it saves money on warehousing, lowers taxes on inventory, and reduces labor costs. Congress encouraged “Just in Time” by changing the tax laws to penalize companies for keeping inventory warehoused after the end of the fiscal year. Once again, our elected officials created the foundation for this disaster.)

Simmons points out that the gasoline weekly stock reports have been trending sharply downward since last winter (with a brief upturn in the spring), and that even before Gustav and Ike we were in "just in time" supply mode. (Inventories are down, company profits and bonuses paid to top executives are skyrocketing … do you suppose there is a connection? Possibly the creation an artificial shortage to keep the prices high, and to keep profits and bonuses high?)

Getting back to a safer level of extra capacity isn't simple, either. Once the refineries get back up and running, they'll drain the already low crude oil inventories. Unless gasoline demand stays low, Simmons believes, we'll have a hard time clawing back to stability. (Translated to English, the oil companies are not going to cut into their profits or their bonuses just so that the working people who pay for those bonuses can be spared a bit of suffering.)

That's why he worries about a top-up catastrophe that could cripple the trucking industry and disrupt food deliveries. ( More fear tactics, everyone is going to go hungry unless we do something – [what congress and the president want] – and do it fast!)

As he told me the other day: "If we end up having gasoline shortages, the odds are about 90% that Americans will do what we always do: We'll top up our tanks. And in topping up our tanks, within three or four days we'll drain the pool dry and then within seven days we'll run out of food." (More fear)

That sounds awfully dire. (Dire!!! To me, the possibility of an economic collapse, being stranded somewhere with no food, facing the possibility of mass starvation and the chaos that would ensue, that sounds absolutely terrifying!) And it probably won't happen. (Then what was the point of bringing it up the way you did?) But, then again, a couple of months ago hardly anybody would have predicted that AIG would collapse, Congress would be mulling a Wall Street bailout, and '70s-era gas lines would be back. (Oh, so you could bring it up again and have one more chance to scare the hell out of us.)


This was not the article I had originally planned to post today, but when I read it this morning, it so clearly illustrates the core issues that we are facing, both in the church and in our society. We have one group that is creating problems, a group trying to keep us from knowing that there is a problem, a group exploiting the fear factor for personal gain, a group who are terrified victims, ... one could say it is simply more business as usual in our country, just a different scenario now.

What is present is fear. Lots of it. What is conspicuously absent, at least in the article, is love.

Anyone seen my rubber duckie?



  1. Haven't seen any signs of a gas shortage out West. In fact prices are relatively low.

    Am now in Albequerque having made it safe and sound. I have not been in New Mexico before and now I can see why a lot of psychic and creative artist types have gathered around Santa Fe. It's a unique and pretty city.

    You are so right about the fear factor constantly being coupled with the greed factor and the secrecy factor. I'll give reaganomics this much credit, it's good at percolating up the fear levels, but not much else.

    THis is now the third time in less than one hundred years the Republicans have made a disaster of the economy. Why in the world would anyone trust a republican with the economy?

  2. We're ok here on the East Coast with gas prices slightly down. The fear factor might cause some people to start hoarding food or black markets forming to hoard gas. Fear is also a sly way to get people to buy more than they need right now. Retailers must love it. Quick profits - ye haw. It's cowboy bronco economics - a fast dangerous ride with the rider being bucked right off in the end. Now we the people are asked to ride the bull in the bailouts.

    Colleen hello - and yes, "why in the world would anyone trust a republican with the economy?" I think that some are still in denial and they fear democrats will take away their ability to earn more money by increased taxes. The denial factor is sort of a defense mechanism for those stuck loyal like glue to their party and its original traditional aspects. Despite the fact the traditional aspects have been stripped and evolved into something completely different, their loyalty and alliance holds out. We might call them the pharisaic republicans.

    Since there's been no new refineries built in over 30 years and the policies of the Bush Admin have not considered the infrastructure or American workers, have had no Prudence, and have only considered the money earned by those at the top as a sign of economic strength, this is why we wind up where we are in economic instability. Discounting, undervaluing the middle class as the driving force for economic stability and strength has caused this. The effects of trickle down economics, deregulation, living in the moment without regard for potential disastrous consequences creates the conditions for monopolies & big business to use up its natural and human resources in more dehumanizing ways. There is nothing loving about it at all. It is simply a system of greed for profit for those at the top. It was doomed for failure from the start. We don't have to worry about external terrorist, since we have our very own right here and they capitalize on the fear.