Spot shortages of gasoline?

by Philip Brewer on 15 June 2008 8 comments
Photo: lynn smith

As long as prices are free to rise, I wouldn't expect much in the way of gasoline shortages--at least not widespread, long-lasting ones.  But it's actually pretty easy to produce a local, short-term one.  In fact, it doesn't take much more than people worrying that there might be one.

Suppose one local filling station has a supply glitch and the local TV stations and local paper run with scary headlines over a picture of the "No gas" sign.  If that prompts any sizable fraction of drivers to stop in their local filling station for a precautionary extra fill-up, that could do it all by itself.

Think of it this way:  The average car's gas tank is about half full--for every guy who just filled up, there's another guy who's about to fill up.  Multiple one-half the size of the average gas tank by the number of vehicles in your city, then compare that to total amount of gasoline in all the filling stations in town.

Doing a back-of-the-envelope calculation for my town, I'd guesstimate that there's around 100,000 cars and trucks that use gasoline and that the average tank could probably hold another 10 gallons of gasoline if they went out for a fill-up.  So, that's a potential demand for maybe 1 million gallons of gasoline, if they all decided to top off their tanks.

A typical filling station might have tanks to store 25,000 gallons of gasoline, but of course their tanks are only half-full on average as well, so that means around 12,500 gallons per station.  So, the potential surge-demand of everybody deciding that they really ought to top their tanks off could drain some 80 gas stations dry.

Now, it's pretty unlikely for one overblown story about gas shortages to send everyone out to fill up their tank, and there's also probably more than 80 stations in town.  But these things can feed off one another--if a demand surge runs one station dry, the "No gas" signs at that station feed the surge by sending another batch of people off to fill their tanks.  That runs another couple of stations dry and so on.  At the same time, of course, everybody is doing all their ordinary driving--all this demand is in addition to the ordinary, everyday demand.

It might seem a little counter-intuitive, but my recommendation for dealing with this risk is that you keep your tank full.  (This is in keeping with my general advice on the ethics of hoarding--as long as you're buying what you're going to use in the reasonably near future, you're not contributing to the shortage.)  

It means that you won't contribute to the problem--your tank is already full (or nearly), so you don't need to rush out for a fill-up if gas shortages hit the news.  It also means that you won't be severely impacted by the minor, local, short-term supply disruptions that are an entirely predictable consequence of the kind of supply shocks that are pushing prices up.

Frankly, we'd all be better off if gasoline were a bit easier to hoard--it'd mean that more people had a stockpile and wouldn't need to go rushing off to the filling station when news broke of possible shortages.  It's hard, though, to hoard more than what fits in your tank--storing gas in gas cans doesn't work well (the gasoline evaporates), plus it's dangerous (gasoline is flammable, explosive, and toxic).  A proper underground storage tank is expensive, and subject to considerable regulation.

As a practical matter, keeping your vehicle tank full is about as far toward hoarding gasoline as the ordinary person can go.  Fortunately, it's far enough to help considerably.

I'm old enough to remember the gas lines in the 1970s.  Those were largely caused by government controls on prices.  (Price controls are the classic way to create a shortage.)  If there are no price controls, I would would expect any shortages to be minor, local, and temporary.  But just because there won't be severe, widespread, and long-lasting shortages, doesn't mean that there won't be any.  An extra half-tank of gasoline makes it a non-issue if there's a minor glitch in gasoline distribution affects a few local stations.  If you let your tank get close to empty, that same minor glitch could see you driving on fumes, hoping that the next station has gas--and in no position to do comparison shopping if the price looks a little high.

On a previous post on a related topic, one commenter reported that the process of evacuating for Katrina produced spot shortages of gasoline.  Clearly, anyone trying to flee a disaster is better off if they can just go, without having to stop for gasoline--possibly having to wait in long lines.  In an emergency, some fraction of the gas stations may be inaccessible--fallen trees, flood waters, or the police blocking traffic some directions.  In addition, some stations may be closed because their workers have already evacuated or the power is out.  The stations that are open will be the first to run out of gasoline.

Of course, don't wait until there's news of gas shortages to take this advice.  That would make you part of the problem.  Do it now.

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Guest's picture

Spot shortages are common where I live. We are on the end of a pipeline and have a tank farm in the area. But it is fed out of a group of refineries in Oklahoma and Kansas. Post Katrina the Oklahoma refinery could not get the oil they normally did and we had stations running out of gas. There was also a refinery fire in Oklahoma this caused tanker trucks to be lined up for about a mile waiting to get in to the tank farm and many stations out of gas for days.

There are plans for a pipeline from Canada and a refinery here. Of course there are people fighting it. I'm not thrilled really about refineries and pipelines but it does mean we will have a second source of gas and that will go a long way toward keeping things going in the face of more uncertainty in the world.

Guest's picture

I paid $5.60/gal for regular yesterday. It was in a small town where it doesn't take much to create a spot shortage. I really needed the gas, so I paid. Keeping my tank full could have prevented the problem.

Guest's picture

I am old enough to remember the very real shortages and consequent rationing of the early 1970's. You could only buy a limited quantity of fuel on even/odd days (based on license number); there were always lines wrapped around the block and people routinely ran out of gas, sometimes while waiting in line at the pump. Price was not the issue, there was an actual shortage. By the end of that crises, speed limits had been dropped to 65, car design changed radically, and fuel efficiency was the #1 buzz word. It was taken VERY seriously.

Fred Lee's picture

How many of us really know what's going on at the gas stations across the country, or for that matter, just across town? Most of us are only concerned with the local gas stations that we frequent, and they pretty much represent our universe. When shortages or rationing occur at these stations, even though the effect is limited, it sends us a message that this is the state of the world. And as you mention, when the media steps in and starts hyping up the so-called crisis, it snowballs from there. 

Guest's picture

That's a great point Fred.

Guest's picture

I do try to keep my tank full all the time and fill up when I hit the half way point. It makes me feel better knowing that I don't have to worry about running out of gas on the highway but it makes me feel better about filling up. I don't have to pay for the whole tank, which makes me feel less stressed out about filling up in the first place. While I'm sure I'm not saving any money by doing it, I feel like I am.

Guest's picture

I don't mean to be a conspiracy theorist, but I think gas shortages are helping raise the prices of gas. It's exactly what Enron did in California when they controlled the power stations and told them to shut off the power. This boosted huge profits when it raised the price of electricity. Enron received huge revenue profits. I don't want to say this is it, however it is something to think about.

Guest's picture

I also remember the gas shortages of the 70's. Alot of wasted time in line. My family has 3 cars, Mom, wife and myself. We never let them below 1/2 a tank. My employer's attendance policy is average, and with that in mind, if something bad happened, we would be able to go to work and groceries for 2 months. It's like being prepared. Dad and I were boy scouts and we try to be prepared all the time.