Refining a Gas Shortage in the South

If you do not live, work or do business in the South, then it might come as news that in the aftermath of hurricanes Gustav and Ike, a host of towns in the southeast were suffering gasoline shortages this past week.

The Washington Post reported:

In Atlanta, half of the gasoline stations were closed, according to AAA, which said the supply disruptions had taken place along two major petroleum product pipelines that have operated well below capacity since the hurricanes knocked offshore oil production and several refineries out of service along the Gulf of Mexico.

Drivers in Charlotte reported lines with as many as 60 cars waiting to fill up late Wednesday night, and a community college in Asheville, N.C., where most of the 25,000 students commute, canceled classes and closed down Wednesday afternoon for the rest of the week. Shortages also hit Nashville, Knoxville and Spartanburg, S.C., AAA said.

The problems come from refinery woes along the coast of the Gulf of Mexico.

The Post noted:

The Energy Department said that as of Wednesday 63 percent, or 800,000 barrels a day, of production in the Gulf of Mexico was still shut down as were five refineries with a combined capacity of 1.2 million barrels a day. The refineries produce a half-million barrels of gasoline a day, or about 5 percent of the nation's total supplies. Other refineries are still working at less than full capacity. Hurricane Gustav landed Sept. 1, and Ike hit Sept. 13.

There are so few refineries in the region that if the supply chain gets hit, then shortages result. For good measure, refineries have to wrestle with boutique fuel mandates from the government.

So, while politicians prattle on about the need to deal with high energy costs, a regulatory morass persists that restricts refineries from being built and gums up gasoline production. Not smart economics, not smart energy policy.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council