Welcome to our new Magazine format! All new content will now be brought to you in this easy, new format. All our older content can still be found by scrolling below. Simply click the ">" to start the magazine and navigate via your arrow keys.

Wednesday, March 9, 2011

One nasty fuel panic, game over...

One nasty fuel panic, game over...

By one nasty fuel panic I mean: 50-60% of the vehicles here in the US start feeling the pinch of $4-5 gas, decided to simply top off the gas tank within a day.

Bottom line [ Math below ]: If 50-60% of Americans simply topped off their gas tanks, it would exhaust all of the refined motor liquid fuels in the retail pipeline in ~ less than one business day.

We have ~ 2 weeks of refined motor liquids in US reserves behind this, but to rebuilt the three days back into the service sector supply chain, it would take ~ 2 weeks with one big caveat: These 2 weeks, is not assuming whatsoever the increased panic of the population during such an event. i.e.: Fuel delivery truckers do not get into their rigs during times like this, even with overtime/hazard pay.

This is not info from a friend of a friend, whose cousin worked at Krystal. I cut my teeth as a young process engineer at Mobil working on slowly rolling out JIT in the mid-eighties (Just In Time Inventory mgmt for liquid fuels),and even back in the eighties, we talked as nauseum about the one major risk that JIT brought to this industry: What an absolute disaster it would be now if folks panicked and topped off.

Just in time Inventory, as wonderful as it is for maximizing short term profits and efficiency, is what will make this an order of magnitude more nasty than the OPEC issues of the early 70's. You will not hear main street media speaking of panic at the pumps. The DOE calls this effectively: Yelling fire in a theatre.

The DOE has a plan in place should this occur. It is not to our immediate benefit (understandably so): Military, Safety, Health care, and critical infrastructure are first. Food supply will be up and running in 2-3 weeks, if the event(s) that triggered this have at least maintained, or at best - improved.

The key here is: Food. Have at least 2-3 weeks on hand. According to DOE, the average family has ~ 6 days of food in their home. During a nasty freak out, history teaches us that the first thing that people think about buying provisions to sustain them for an unknown period of time (hoarding). Food provisions are a basic, emotional instinct reaction. No thought goes into a panic to get the home pantry stocked with food, and if available at the grocery store, people do not just buy what they need - they hoard. This is basic instinct, no thinking brain required.

Simplified Math:

1. 200,000,000 vehicles on the roads in the US.

2. Average amount of fuel burned, per vehicle: 1.8 gallons/day

3. Average amount of total fuel burned, US: 360 Million gallons/day.

4. The US retail reserves: Wholesale storage tanks, tanker trucks, retail storage tanks, Pipeline: (~ 3 days): ~ 1 Billion Gallons.

5. To fill the average gas tank to Full: 8.2 gallons (meaning, the average americans tanks is just over half a tank)>

So, if 50% of the vehicle fleet freaked out just a bit and topped off the tank: 100m * 8 gallons = 800 million gallons. The rest of the folks would see this, and begin to top off theirs as well, and whalla - out of fuel.

Three things are important to note:

a. We do have ~ two weeks of refined motor transport fuel to satisfy US demand. But, in a crisis, this is not earmarked for retail outlets.

b. We do have the SPR (strategic petrolium reserves). This is crude in storage (unrefined). But again, in a crisis, will be indeed heading to the refineries but not earmarked for retail consumption.

c. The US does not have the refining capabilites to serve our refined fuel demand. We import a significant part of our refined fuels.

[B]It is not a bad idea, during times like these, to go to the extra effort to keep the guage above 50% at all times, and ideally, to have at least one tank of fuel at home in storage. It is not advisable to try and "guage" when a panic will occur, so you can be just ahead of it and act then. You likely will not have a heads up nor the time to act appropriately.

FOOD and some FUEL: these are an excellent insurance policy, with not much risk. If you haven't already, take 2 hours to buy a months worth of groceries and half a tank of fuel. There is no risk here, if things improve. But if things turn south, it will be the best investment You can make for yourself and your family

The scariest part develops quickly if a energy crisis is sustained for 4-6 weeks. That will, indeed, be a time to watch out and be careful.

I know most of You are well aware of all of this. But I thought I would post this for a reminder and mainly for the new folks. Welcome.