Post-Ike gas shortage may take weeks to end

The current gas crisis is worse than the 2005 shortages after hurricanes Katrina and Rita, say some experts.

The effects of hurricane Ike largely emptied two critical gasoline pipelines that feed much of the South, leading to widespread panic-buying, shuttered pumps, and even some fistfights as motorists vied for precious drops of gas from Anniston, Ala., to Asheville, N.C.

Although public officials called for calm, promising quick relief, experts such as Atlanta gasoline distributor Tex Pitfield said it could actually take another two weeks for supplies to ramp up.

That's because the widespread flooding and power outages that shut down 15 Houston-area refineries are not the only reasons why some 75 percent of gas stations in the region have plastic bags over their pump handles.

Getting supplies back on track has been made more difficult by more perennial problems – a shortage of regional refineries, an energy policy that demands nearly 200 boutique fuels to meet air quality standards, and a tangled middleman distribution system of gasoline "jobbers" seen as a weak link in the government's ability to control the economy's critical fuel link.

"The whole situation does point up the need for additional refining capacity in the country," says Ray Perryman, a Waco, Tex.-based energy economist, in an e-mail. "Even in a time of moderating demand, we do not have the ability to overcome even the interruptions that are inevitable. I am not sure I would call the frailties new, but they have certainly been brought into sharp focus."

Veteran oilmen said the crisis outpaced the 2005 shortages after hurricanes Katrina and Rita – notable since neither hurricanes Ike nor Gustav this year wreaked nearly as much havoc as those legendary storms did three years ago.

"We no sooner got up off our knees before we fell again, and now we're stumbling around, trying to recover," says Mr. Pitfield, president of Saraguay Petroleum. "This is significantly worse than Katrina, but we haven't quite been able to quite figure out how or why. We can't get anywhere near the amount of gas to satisfy the demand."

The double-whammy of Ike and Gustav came as supplies were already low. Refineries in the Gulf had begun to ramp down production of summer fuels before Ike, meaning supplies were already crimped in anticipation of the Oct. 1 switch to higher-sulphur winter blends.

Media speculation, watercooler rumors, and panic-buying exacerbated the problem. Prices in Atlanta, topping $4.29 in some places, were the highest in the lower forty-eight on Wednesday.

In Nashville, drivers waited for hours for fuel, only to see gas pumps covered in bags. In Atlanta, some motorists ran out of gas in line and had to push their cars to the pumps. In Asheville, one gas station owner had to call police after at least three fistfights broke out. An Alabama paper said the regional mood was "as jumpy as a frog farm."

"People become desperate, man, availability is more important than price," says John Baen, a pipeline expert at the University of North Texas in Denton. "It's the South today, but it could be [Boston and Chicago] tomorrow."

There are still 15 refineries in the Gulf that are not at full production – with six not yet operating at all in the Port Arthur and Texas City area of Texas – mainly due to extended power outages in the wake of hurricane Ike. The Colonial Pipeline, which makes a deep arc from the Gulf, through the South, and up into New York, is running far from capacity, and dealers are anxiously awaiting supplies that run only at 5 miles per hour through the pipeline.

On Wednesday, the Environment Protection Authority (EPA) agreed to waive special low-sulphur requirements for the "Atlanta blend" of gasoline in order to get supplies into the city. The EPA rarely approves waivers for localized shortages, but political pressure is high as the House Committee on Energy and Commerce monitors the situation from Washington.

Gregg Laskoski, a spokesman for AAA Auto Club South in Atlanta, says the gas shortage also highlights US dependence on some 200 boutique fuel blends that take into account local air quality and automobile performance standards. One way to ease the pressure, he says, would be to create perhaps two standard fuels, making the national supply more interchangeable and easing pressures on overworked – and vulnerable – Gulf Coast refineries.

"These boutique fuel requirements that are legislated in so many states are counterproductive at times like this," says Mr. Laskoski. "It would also reduce costs if you could create more of a commodity item rather than a specialty item."

On Tuesday, 20 tanker ships full of gasoline refined in Europe were diverted from the Atlantic Coast to the Gulf in order to bolster supplies.

In Tennessee, Gov. Phil Bredesen refused to enact statewide rationing, saying the emergency wasn't serious or widespread enough to warrant it. But some drivers commenting on the local news website, The Tennessean, said state leaders were living in an "alternate Nashville" as a majority of pumps remained closed.

In Alabama, legislators introduced a new law to crack down on price gouging by limiting price discrepancies in emergencies to 15 percent and raising fines to $5,000.

But Mr. Baen, the UNT industry expert, says tough stances on price gouging may have exacerbated the shortage as jobbers focused on getting gas to areas that were easier – and cheaper – to reach. Without financial incentive to get to outlying areas, those pumps simply remained dry.

That's what seems to have happened in the mountain city of Asheville, N.C. With many independent dealers and jobbers facing long distances over steep grades, distributors with limited supplies chose their routes based on what was expedient – and profitable.

As a result, the city of Asheville cancelled several events. Landscapers, florists, and plumbers all declined work for lack of gas.

And as panic-buying subsides, some drivers are altering their driving habits. Some, like Wendy Meyer in Atlanta, decided to park her SUV permanently in favor of walking to work.

"[Gas supply] is frail, it's delicate, and we should appreciate the availability that we do have," says Baen.