Oil Industry Experts Discourage Gas Hoarding

Sep. 1–Gasoline retailers and oil industry experts said yesterday that there should be enough gas to go around for motorists, truckers and airlines as long as consumers avoid panic-buying in the wake of Hurricane Katrina.

But that’s just what some price-conscious motorists were doing yesterday. In Baltimore and across the nation, isolated reports surfaced of gas stations running low — or running out — of regular unleaded gasoline as drivers rushed to fill up before prices go higher.

Lines and shortages were reported in Maryland and throughout the country yesterday, from Phoenix to Bloomington, Ind. Shortages were so widespread in the stricken Gulf states that the Red Cross couldn’t get gas for relief vehicles. With prices passing the $3-a-gallon mark in some areas, analysts said consumers were scurrying to fill their tanks with pipelines from the Gulf damaged and 10 percent of the nation’s refining capacity wiped out by Katrina.

The result is that the nation’s gasoline inventory is rapidly approaching its all-time low — the minimum point needed in order to keep the system running without disruption, according to some experts.

Some fear the buying frenzy could further strain a system already near the buckling point because of storm damage to one of the nation’s most critical oil-producing regions. Replacing production wiped out by Katrina could prove especially problematic for the Eastern Seaboard, where retailers are normally nourished by a pair of gas pipelines that originate in storm-ravaged Louisiana.

With the pipelines temporarily out of commission, that gas has to come from someplace else. Anxious traders pushed gasoline futures up 17.55 cents yesterday to $2.65 a gallon on the New York Mercantile Exchange, or about 35 percent higher than Friday’s close.

A similar crunch occurred after the Sept. 11, 2001, terrorist attacks, said John Eichberger, director of motor fuels for the National Association of Convenience Stores, which presents thousands of gas retailers. Some retailers saw demand surge by five-fold on Sept. 12. A comparable jump today might have a devastating impact on supplies.

“It would help if consumers don’t panic buy, don’t pre-buy,” he said. “Buy what you normally do.”

Wholesalers are already rationing customers, meaning retailers are only able to take delivery of their normal supply, and not a gallon more.

The strain is starting to show, despite prices that are rapidly climbing above $3 per gallon. A Royal Farms convenience store in Howard County’s Glenelg ran out of gas with cars still in line yesterday. By midday, the Crossroads Exxon on Ritchie Highway in Pasadena was about a half-hour from running dry.

Ruman Memon, manager of the Crossroads station, had raised prices four times since the previous day in hopes of stemming the tide of motorists lining up at the pumps. But they kept coming.

“Everyone is filling up because tomorrow will be worse,” he said. “I called Exxon and was told the refinery was out of gas. They said they’d try and get me one load later today.”

The station was selling a gallon of regular unleaded for $2.59 — cheaper than two competitors across the street. Memon said Exxon electronically monitors his tanks and knows when to send him more. But the oil company that normally sent about three-8,800 gallon tankers every two days hadn’t come yet yesterday.

It’s the second time in two weeks Memon has teetered on empty because anxious motorists were pumping two tankers worth a day.

The situation was similar at the Hess station on Joppa Road in Baynesville near Towson, where traffic jams formed Tuesday night as the station was selling regular unleaded for $2.61. The price jumped 13 cents overnight to $2.74 and then another 3 cents to $2.77 in the afternoon — still seven to 22 cents less than competitors down the street.

“It’s been nuts,” said Karla Porter, whose husband Ray Porter owns the station. “We had lines of cars both ways on Joppa. It was total gridlock. The police had to come clear the road.”

The station sold out of regular at 10:30 p.m. Tuesday, a half-hour before closing. Normally, the station sells 5,000 gallons in a day, Porter said. On Tuesday, it sold 11,000 gallons. By 5 p.m. yesterday, it had sold 9,000.

The Department of Energy said producers had 194.4 million barrels of gasoline in inventory as of Friday, which doesn’t include the gas sitting in tanks at gas stations or in people’s cars. The lowest that number ever reached was 185.6 million barrels on Aug. 29, 1997. That’s the threshold considered the industry’s “minimum operating level.”

“If the situation doesn’t turn around pretty quickly, we could start to approach that minimum number fairly soon,” said Doug MacIntyre, a senior oil market analyst with the U.S. Energy Information Administration in Washington.

MacIntyre stressed that hitting the minimum doesn’t mean there will be shortages and 1970s-style gas lines. It just raises the risk, since the industry has never reached a level below that number since the government started tracking it, he said.

Dan Pickering, president of Pickering Energy Partners in Houston, said consumer behavior is driving the system closer to the brink. If 170 million motorists all start keeping their tanks more full — three-quarters full instead of half-full, for example — in order to hedge against gas shortages, some areas will see gas stations run out of supplies.

“If you were to see a demand surge because of people trying to beat higher prices or because they’re worried about not being able to get gasoline, all of the sudden you could wind up with service stations that don’t have any gas,” he said.

The problem threatens to spill over into the airline industry, which was already struggling with high jet fuel prices before Katrina hit. Airlines reported yesterday that there was enough fuel on hand at the nation’s airports to continue normal operations everywhere except airports in New Orleans and Gulfport-Biloxi, which remained closed.

Most major airports get the bulk of their fuel supplies from pipelines that also move the nation’s gasoline and home heating oil. But the supply has been cut by about 13 percent because refineries in the Gulf region that feed the pipes were damaged, according to the Air Transport Association, the industry trade group.

Already, the group said it was shipping jet fuel to airports in North Carolina and Florida where supplies were short. Airlines say it’s not uncommon for them to ship by tanker truck extra fuel to airports in short supply, and several said yesterday they were prepared to move supplies as needed.

“We’re OK so far,” Southwest Airlines spokeswoman Whitney Eichinger said. “We don’t know the total impact because it’s not over, but we have made no changes or cancellations.”

By By Paul Adams, Meredith Cohn and Laura Barnhardt

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