In the wake of Hurricane Katrina, there appears to be sufficent oil and gas to replace lost Gulf of Mexico production, especially now that the Administration has today announced that companies can borrow from the Strategic Petroleum Reserve. The problem is the lack of refineries to process the oil into gasoline and other products, with the Gulf coast refineries out of production. Complicating matters, it is not yet known if there has been any pipeline damage that would prevent Gulf coast refined gasoline from moving to market. Presuming no damage impeding operations, refineries and pipelines need power restored to work.
That said, a wave of speculation is running through the country today that there is a coming shortage of gasoline. How much and for how long will depend on how soon Gulf coast refineries are operational and shipping product. There is little spare refining capacity in the USA or Canada. 45% of US refining capacity is on the Gulf Coast; but only 10% in the area that took the direct impact of the hurricane. It is not yet clear how much of this capacity will be out of commission for an extended period; optimists hope that all of it can be running again with power restored. The US simply does not yet have a clear picture of how serious or not a gasoline supply crunch might be; the next 48 hours should tell the tale.
The Administration expects that any shortage will be most acute in the mid-West and further east to Michigan. Complicating matters is the fact that many Americans are responding to the expected shortage by rushing out and filling up, including additional gas cans. There are also sporadic reports of price gouging and DOE has set up a hot line to receive complaints. The Administration is asking the public not to panic, not to hoard and denying that it is anywhere near needing to impose any rationing. The Administration is underlying that there are also some gasoline inventories throughout the country.
The Administration is working with OPEC and the International Energy Agency (IEA) to see what can be done. Saudi Arabia has announced that it will ramp up its production to 11 million barrels/day (up 0.5 million barrels/day). IEA members who are net importers of oil and gas (not Canada) must keep a 90 day stock and make it available to other members during emergencies. That said, again the problem does not appear to be access to oil and gas, but rather lack of refining capacity to produce gasoline, and possible other oil products (jet fuel). Most likely supplier would be refineries from Western Europe, from which gasoline shipments would still have a 5-6 day shipping delay to get product to the USA.
