Have gas prices gone crazy? Will we run out?
By James R. Healey and Chris Woodyard, USA TODAY
Even before Hurricane Katrina screamed ashore Monday after ravaging the country's petroleum operations in the Gulf of Mexico, seven of 10 Americans considered high gasoline prices a hardship.
A BP station in Atlanta has been out of gas since Tuesday.
By Todd Bennett, Getty Images
Now, shortages caused by Katrina have more than doubled last week's gas prices in some places. That's provoked howls of suspicion as motorists for the first time in decades are waiting in line for gas, not sure they'll get any nor what they'll pay for it when it's their turn at the pumps. (Story: Gas shock echoes across USA
The Explorer Pipeline
Transporting 72 kinds of gasoline, diesel and jet fuel from the Gulf Coast to the Midwest, the Explorer Pipeline remains shut down because of a power failure.
Petroleum products move at a rate of four miles per hour, or 15,000 gallons a minute, to more than 60 shippers in 16 states.
Jointly owned by subsidiaries of Chevron, Citgo, ConocoPhillips, Marathon, Sun, Texaco and Shell.
One barrel of petroleum product going to Chicago from the Gulf Coast takes 11 days.
The Plantation Pipe Line
It can transport one gallon of its petroleum products, including gasoline, jet fuel, diesel and heating oil, more than 1,000 miles for less than two cents. After briefly shutting down, the company announced Wednesday that it has returned to partial service and is at about 25% of normal operating capacity.
20 million gallons of petroleum products to 130 shipper terminals in eight Southeastern states.
Kinder Morgan Energy Partners, 51%;
One batch going to Washington National Airport
from Baton Rouge takes 20 days on average.
The Capline Pipeline
The Capline crude oil pipeline, which had been shut down on Sunday ahead of the hurricane, has returned to service but at a reduced rate. Its owner, Shell, said in a statement on its Web site that the pipeline was not damaged, but that a power outage caused it to be inoperable for several days.
Up to 1.2 million barrels of crude oil
from the Gulf of Mexico and foreign countries to midcontinent states
Royal Dutch Shell
A batch of crude oil going 650 miles to Patoka,
Ill., from St. James, La., takes five days on average.
The Colonial Pipeline
The Colonial Pipeline restarted its pipeline activity Wednesday after briefly shutting down. It began operating at 25% to 35% of its normal capacity. It connects to shipper terminals in 12 states and the District of Columbia.
: 5,500 miles
100 million gallons of petroleum products throughout the Southeastern and Eastern USA
Koch, 28%; Hutts, 23%; Citgo, 16%; Shell Pipeline, 16%
Moving about three to five miles an hour, a batch of petroleum to New York Harbor from Houston takes 18.5 days on average.
In a USA TODAY/Gallup/CNN poll taken Sunday through Tuesday — as Katrina was slamming into Louisiana and Mississippi but before the extent of the damage was known — 69% of Americans said gas prices were a hardship. That's up from 59% in May, and the most by far since the question first was asked in February 2000.
The nationwide average price for regular unleaded was about $2.60 a gallon at the time of the poll, which has a margin of error of 3 percentage points. Now the average is $2.68, but prices are more than twice that where gas is scarce or merchants are brazen.
As a result, fuel budgets are running dry and motorists are protesting what seems to many of them like shameless profiteering.
Here are the questions being asked most often, most angrily:
Q: Aren't gas stations gouging or price fixing; raising prices just because they can?
A: Sometimes, yes, retailers are exploiting the situation.
But often stations are not gouging. They are raising prices because they paid more for gas the last time the delivery truck filled their underground tanks, or they are trying to charge enough to cover the higher prices they will pay the next time the delivery truck shows up, usually within a few days.
Tanks are refilled once a week at a typical midsize station, several times a week at high-volume discount stations.
Thus it's unlikely a station is charging today's fear-induced prices for gasoline the station bought a month ago for half today's price.
Price fixing is different from gouging. It's when competitors get together and decide how much to charge. If the manager of the Chevron station has coffee with the manager of the Mobil station across the street and they talk about how much to charge, that would be price fixing. Same if two or more big oil companies did that, or two or more petroleum distributors.
If a station is simply adding 50 cents a gallon to cover its expected higher costs, or purely to make a bigger profit at a time when prices elsewhere are going up about the same, then that's just hardball business.
Q: Will we run out?
A: Yes. Some stations already have. There's enough gasoline; it just isn't always in the right places. Shortages are expected to be isolated and short-lived.
The result of Katrina's damage is a loss of about 1 million barrels of gasoline a day, or about 10% of U.S. gasoline consumption, according to the U.S. Energy Information Administration.
EIA says: "The distribution of gasoline, particularly in the Gulf Coast, Midwest and East Coast regions of the country, has been significantly affected."
EIA also says that storage terminals low on gas before Katrina "could run out of supply before the next delivery arrives." But it says it doesn't track inventories at individual storage terminals, so it can't predict where shortages will occur and how long they'll last.
Until energy companies can accurately survey the damage to their gulf operations, it's impossible to say when supplies will return to normal.
Q: How can a hurricane in the gulf affect prices and availability elsewhere?
A: Because so much gasoline comes from the gulf. That's where most imported gas is unloaded. It's where many U.S. refineries turn crude oil into gasoline. And it's where key pipelines get the gas they supply to the rest of the USA.
Reports from the U.S. Department of Energy and from energy consultants Thursday showed that gulf pipelines supplying Indiana, Ohio, Illinois, Kentucky and eastern states are shipping less-than-normal amounts, or are out of commission, because of Katrina.
When gas gets short in one region, prices go up in that area. Gasoline suppliers start diverting gas to the high-price area from other regions to make bigger profits. That leaves those other regions short of gas, driving up prices there even though they are not directly affected by Katrina.
Q: Why isn't the government helping?
A: It is, or is trying to.
The Department of Energy is releasing oil from the U.S. emergency horde, called the Strategic Petroleum Reserve, to make sure there's no shortage of oil to turn into gasoline. But that's cold comfort because so many refineries are in the gulf and have been shut by the hurricane.
The Environmental Protection Agency loosened clean-air rules. That allows gas-short areas to get gasoline from other states and regions even if that gas wouldn't normally meet anti-pollution standards in the areas that need gas.
The USA is a crazy quilt of gas regulations, and normally a highly polluted area has to sell special gas to combat that pollution, instead of using ordinary gasoline from a supplier in a nearby state or region. The EPA relaxation means gas from anywhere can go to stations anywhere, temporarily.
Q: Is there any relief in sight?
A: Yes, and it's partly because of the high prices that are infuriating motorists.
European gasoline sellers have booked 20 ships — an extraordinary number — to carry gas to the USA and take advantage of the high prices.
"If prices get high enough, you can afford to ship product from great distances. Capitalism is a great way to address supply and demand," says Paul Weissgarber, head of North American energy practice for consultant A.T. Kearney.
The big Euro shipments won't arrive until October, however.
By then, U.S. refineries will have switched to making cheaper, easier-to-produce, winter-blend gasoline. And driving usually falls off dramatically after the Labor Day weekend.
Energy companies have been making such big profits from high prices even before Katrina's damage that they are likely to rush back into operation as fast as possible.
Petroleum traders are betting the crisis won't last too long. They have bid up the wholesale price of gasoline for delivery this month and next to roughly $2.50 a gallon — more than the retail price you paid at the pump just three weeks ago — but wholesale prices for gasoline to be delivered in the winter months have been holding at less than $2.