US Summer Gas Shortages Loom

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I apologize if someone else already posted this earlier.



-- slza (slzattas@erols.com), February 13, 2000

Answers

An interesting statistic from this article: "gasoline stocks have fallen to just over 200 million barrels, the lowest February levels of the decade and 7 million barrels below the depressed February 1997 levels" ... which represents approximately 28 days of normal usage for the U.S.

I don't know any of the details about how the oil refinery and distribution process works ... but it seems to me that 28 days of inventory is NOT a good example of the JIT approach that most industries try to achieve. Dell Computer, for example, keeps most of their parts in the factory for approximately 4 HOURS before they are incorporated into a PC and shipped out the door.

Do any of the oil experts here on the forum know why it is that the oil industry feels that it's important/prudent/cost-effective to have a full month of inventory on hand?

Ed

-- Ed Yourdon (ed@yourdon.com), February 13, 2000.


Well, my html didn't seem to work. Here's the URL to cut and paste: http://www.marketwatch.newsalert.com/bin/story?StoryId=Cokoxub8ZtJeWmt m5otGX&FQ=oil&Title=Headlines%20for%3A%20oil%0A

-- slza (slzattas@erols.com), February 13, 2000.

Link

-- Linky (@ .), February 13, 2000.

Re: JIT Oil Inventory

I suspect the 200m in stock is an estimated number. The American Petroleum Institute polls analysts weekly, throws out the high and the low, and averages the remaining estimates.

I think the reason the number is so high is due to the great number of fuel storage containers, facilities, depots etc. (several at every gasoline station in America). If one assumes that all containers are half full one could estimate the amount in storage. The individual retailer has a resupply schedule that is designed based on the size of his tanks and the frequency of resupply to keep him from running out in normal periods of demand. It does appear that there is significant scrambling to divert petro product from one market to another, ie midwest to north east.

Bottom line: I think the number appears high because it is a distributed system with constant movement in the resupply line. This implies that we may have more than 28 days before we run out because more is on the way to arrive before the 28 day stock is consumed.

A local observation; Shell Oil gas station nearby has been closed at 8:00 pm Friday and Saturday nights when all other local stations have pumps open and customers pumping. I wonder why Shell is willing to lose this business. Until recently they were open 24/7.

-- Bill P (porterwn@one.net), February 13, 2000.


Ed wrote: Do any of the oil experts here on the forum know why it is that the oil industry feels that it's important/prudent/cost-effective to have a full month of inventory on hand?

1) We are critical infrastucture and we know it. No one want's to run the public out of anything (contrary to what the "oil gouger conspiracy buffs would have you believe). Running people out of any product is a BIG no-no.

2) The numbers the API puts out are indeed an estimated number (albeit slightly better than an outright guess). The other issue is that a couple of days are built in to the pipes, terminals etc that transport the stuff.

Hope that helps.

-- Gordon (g_gecko_69@hotmail.com), February 13, 2000.



Some miscellaneous comments:

When a retailer, such as Dell, can sell today and ship tomorrow, or the next day, or the next day, it may be relatively easy to anticipate stocking requirements. :-)

In the case of the estimates of gasoline stocks, such estimates include much of the supply chain, not only the retailers.

I suspect that if it were possible to estimate, for example, the number of days worth of solder in the computer industry supply chain, it might approach that of gasoline, although it would probably be a useless datum. :-)

Meanwhile, I had previously asked a local (very busy) retail gas station operator how many day's worth of fuel he kept in his tanks. He replied that he didn't think of his supply in terms of days worth, but that on most days, he needed two deliveries. He indicated that deliveries are very dependable.

A much less busy nearby competitor, on the other hand, averaged between three and four deliveries per week.

Jerry

-- Jerry B (skeptic76@erols.com), February 14, 2000.


Thanks for this post. One sentence got to me:

"Officials at the EIA said recently that all the ingredients for a continued price spike exist, and predicted that retail prices could hit all-time highs of around $1.40 or more a gallon by the height of driving season."

Heck, gas here in central California is already $1.499 at the pump today!

-- No Polly (nopolly@hotmail.com), February 14, 2000.


Just caught a report on the evening news that gas prices in New england are already over $1.40 a gallon. Noticed this weekend that even the self-serve stations in my part of Maine have pushed prices up to $1.35 to $1.38, and tonight I didn't see anything under $1.41, self-serve regular.

-- Cash (cash@andcarry.com), February 14, 2000.

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