Oil, Gas and Jet Fuel! Oh My!

Most of us have already seen the price of gas spike. Here in Raleigh it rose about 40 cents in a day. Reports of gas over $5.00 in Atlanta have made the news and it's only a matter of time until we hear stories of shortages. My wife and I talked about delaying our big Jacksonville trip this weekend but we're going to go through with it anyways. Part of it is good old American defiance (This storm will not get the best of me!) and part of it is willful rationalization (My 20 gallons of gas isn't going to make a difference).

I think it's important to recognize that the reason we're in this mess so that we can avoid it in the future. Let's cut through the political bull and get to the real problem. The "oil" crisis isn't an "oil" crisis at all. To be sure, the rising price of oil has had an affect on the at the pump price but it's actually the lack of refining capacity that has caused the real problems. For approximately 5 years now, refineries have been operating at or near full capacity. Operating 24 hours a day and stopping only for needed maintenance, these refineries are pumping out petroleum products as fast as they can. Restricted from expansion by environmentalists, zoning and NIMBY protests it has been difficult if not impossible to create new refining capabilities at a pace that would guaranty some excess production. Most critics of the energy industry thought that that was OK. They were happy that refining could be expanded just fast enough that shortages weren't an issue. The problem is that the refining capacity is heavily concentrated in various regions and one of those regions is the gulf coast area. Approximately 11% of the US's refining capacity is offline. Normally that would have just led to higher prices but in this case we're going to see shortages.

In addition, many of the same things that have restricted refining capacity have also kept the infrastructure from having the redundancy level that it should have. Pipeline pumps are not working because of the storm and ports that would be excellent destinations for gasoline (Savannah, New York, etc.) aren't equipped for that kind of shipping. Gasoline has become America's guilty pleasure. We enjoy its abundance but we don't want to do the necessary things to permit it to remain abundant.

We're going to have to do alot of soul-searching in the next couple months about energy. How dependent are we on oil? How susceptible to disruption are we? Is nuclear energy a valid alternative source? Are we using solar, wind and hydroelectric energy in the most efficient ways possible? How close are we to having hydrogen fuel cells? It'll be interesting to see what those answers are.