[Ok-sus] Sandy exposes major weaknesses in our energy distribution systems

Bob Waldrop bwaldrop1952 at att.net
Tue Nov 27 11:27:24 CST 2012


Sandy showed us just how weak and vulnerable our energy supply systems are.

The day after Sandy, fuel purchases surged 65% above average.

3 days after Sandy, 70% of gas stations in New York and New Jersey were 
dry.

Bob Waldrop, OKC

http://news.yahoo.com/insight-sandy-gives-york-oil-supply-lesson-sink-105227022.html

A snip. . .

  Long before Sandy, cracks had begun to appear in the harbor's energy 
security. Even as oil and gas drilling booms in U.S. shale formations, 
the East Coast has grown less capable of supplying its own fuel.

Citing poor profit margins, oil companies shuttered three northeastern 
refineries over the past two years, eliminating 24 percent of regional 
capacity. That increases reliance on supply from tankers and Colonial's 
pipeline.

Oil companies' penchant for just-in-time fuel deliveries raises further 
supply concerns. East Coast gasoline inventories were already near 
record seasonal lows before the storm, government data shows.

Traders that handle fuel in the harbor's wholesale market have little 
incentive to keep a surplus in tanks. Oil prices in the $100-a-barrel 
range mean it costs millions to store extra supplies. And since economic 
malaise has been reducing East Coast fuel demand, oil companies are less 
eager to compete for market share, storing fewer barrels.

Also discouraging surpluses is a market condition known as 
backwardation, where gasoline supplies for spot delivery fetch a premium 
to those committed for delivery later on. That prompts companies to keep 
just enough supply to maintain flexible operations in normal times.

As Sandy approached, East Coast tank farms held enough gasoline to meet 
normal demand for 22 days, 12 percent below a five-year average level.

The U.S. government has its own emergency fuel stocks, but federal 
budget cuts led to a 50 percent reduction in the Northeast heating oil 
reserves this year to just 1 million barrels, enough to meet East Coast 
demand for only a few days.

And over the last decade, several fuel terminals got rid of their diesel 
generators and connected to the regional electric grid instead, 
increasing their vulnerability, according to Captain Andrew McGovern of 
the Sandy Hook Pilots, who help direct vessels through the harbor.




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