Coyote Blog

This morning, as I drove to work and stopped to get gas, I noticed that they were sold out of two of their three grades (only premium was left).  The manager told me that several folks had come in today saying that this was the fourth or fifth place they looked for gas, though I will say the next two stations down the street seemed to have gas and I did not see lines anywhere.

Phoenix is one of those funny gas markets, where due to government regulations, we have a unique gas blend that can only be made in one place by left handed Eskimos, or whatever.  Several companies have tried for years to get a refinery permitted to serve this market, but the Arizona state government has consistently blocked it.  As a result, we get some strange ups and downs here, including gas lines last year when the only pipeline into town from the only refinery that makes gas that can be sold here broke.

Its a bit too early for Katrina to be actually affecting wholesale gasoline supplies (update:  or maybe not), but it is not too early for Katrina-led expectations to be draining gasoline inventories.  I explained previously about how an expectation among consumers that gas will be short can become a self-fulfilling prophecy:

Take
the example of 1972, and we will use typical numbers of that era.  Lets
say there were 100 million cars each with an average 20 gallon tank.
Lets say normally, people refill their tank when it is ¼ full, so on
average their tank is 5/8 full.  Doing the math, there are 5/8 times 20
times 100 million gallons actually in cars or about 1,250 million
gallons.  That's right - one of the largest single inventories of gas
in this country is in people's tanks.

Now,
lets say due to supply panic, everyone suddenly refills at ¾ full. No
one wants to be caught short (I remember in the 1970's, people would
wait in line to put a gallon or two in their tanks -- it was nuts).  In
this case, on average they are 7/8 full or there are a total of 1750
Million gallons in cars' tanks.  So, in the space of what might be two
or three days, people suddenly demand 500 million gallons above and
beyond their normal usage to increase their tank's inventory.  Boom,
stations are out of gas, which causes people to feel even less secure
without a full tank, so they inventory more (many in spare gas cans)
and the problem gets worse.

Here is my previous post on why I am hoping for gas price gouging.

Katrina News at Technorati