[Ok-sus] Sandy exposes major weaknesses in our energy distribution systems
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
Bob Waldrop, OKC
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
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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