U.S. oil firms warn of gasoline supply shortages

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U.S. oil firms warn of gasoline supply shortages April 26, 2001


WASHINGTON, (Reuters) via NewsEdge Corporation -

U.S. oil company officials warned lawmakers Thursday that gasoline supply shortages and fuel price spikes could occur this summer if there are disruptions in delivering gasoline.

``The key point I would like to make today is that current U.S. supply (and) demand is at a delicate balance, and any type of major disruption can cause local supply shortages and resulting price spikes,'' said Gary Heminger, executive vice president at Marathon Ashland Petroleum, the country's fifth largest refiner.

The refining firm is a joint venture of Marathon Oil Co. and Ashland Inc.. Testifying at a congressional hearing on fuel supplies, Heminger told lawmakers that the Midwest is chronically short of gasoline, as the region has to import as much as 1 million barrels of fuel a day, or 25 percent of its total demand from the Gulf coast.

U.S. gasoline prices nationwide are increasing because of a tight fuel supply. The increase has been most dramatic in the Midwest as the region's cleaner burning gasoline jumped more than 15 cents per gallon during the last week, according to the Energy Department.

D.H. Daigle, an executive with Exxon Mobil , said a decline in the number of U.S. refineries over the last decade has made it more difficult to maintain adequate fuel supplies if there is a problem at a refinery.

``The tightness of the system creates a very real risk of increased supply disruptions and price volatility,'' he told lawmakers.

Marathon built the last refinery in the United States in 1976 in Garyville, Louisiana and since the mid 1980s the number of U.S. refineries has fallen from 200 to 155 currently.

Refining capacity has increased over those years due to upgrades at existing refineries, but demand has also been rising and will continue to rise, making imports of gasoline and sound fuel transportation systems more and more critical.

Heminger said that if one of the two major pipelines that ships gasoline from the Gulf coast to the Midwest were to shut down, the disruption to fuel supply would be critical.

``Even after the disruption, when the line is fully operational, the replacement (gasoline) volumes will only move to market at about 4 miles per hour, and there is not pipeline capacity or excess refining capacity to make up for the lost volume,'' he said.


-- Martin Thompson (mthom1927@aol.com), April 26, 2001


Did Gary North or some other Y2K "Paul Revere" point out these two surprising facts? That no new refineries have been built in the U.S. since 1976? And that there are only two gasoline pipelines into the Midwest U.S.? These facts would tremendously augment Y2K's justifiable danger level in 1999, due to pre-existing low margins. In other words, it wouldn't take many Y2K related problems to cause major havoc.

Or have the unadvertised Y2K embedded system failures, even if relatively few, the cause of the infrastructure now being so "close to the edge?"

-- Robert Riggs (rxr.999@worldnet.att.net), April 27, 2001.

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