Petrol, Gas, Fuel - Call It What You Will, We Are Its Hyper-Consumers

This about sums up my head scratchings of the last couple weeks/months (and years). This chart is based on 2003 data. At that time the U.S. had under 300 million people and consumed nearly 1.4 million litres (368,906 gallons) of gasoline each day. On the other side you have a sampling of countries that add up (by my quick estimate) to almost 3 billion people. Thats practically half the worlds population using less gasoline than the whole of the United States. This includes other western nations where it could be argued that standards of living and quality of life are better.

Four years on I would not be surprised that the bar on the right has overtaken the US indicator due to increases in domestic demand in countries such as Indonesia, Saudi Arabia, China, India, Russia and Iran - several of these countries subsidising gasoline to its citizens thereby alleviating the effects of increased per barrel oil prices.

The stats are no less shocking, however.

*Image is originally from the economist and taken from the oil drum.

Minnesota Fuel Shortages?

Wednesday evening is about the best time of the week to swing by the petrol station and fuel up. Thursday is the day to increase prices for the weekend. I went to the gas station and found paper signs taped up to the pumps saying the 87 octane was out of order and to fill up with mid-grade at low-grade prices. After doing so, I quick jumped onto Google and perused the energy sites. I already knew the Dakotas had been experiencing very real shortages since early July, and that the refinery in Kansas that was flooded had really tightened up the supply of refined products. A week and some days later the effects have "spilled" over into our state. This short article is a good round up of why it is happening. Here is an odd bit though, it says that people who will really feel the squeeze

"are the small mom and pop (gas stations) ... The Holidays and Super Americas have contracts and will get their fuel first."

I got my fuel at SuperAmerica - they were out of the cheap stuff and having to sell a more premium blend at a cheaper price (most likely below cost; you have to compete). No station, from the mom and pops to the big chains can afford to sell product below cost for for even a short time, if it consistently/frequently runs out of 87 octane fuel.

“It’s driving us little guys nuts. For me, it’s been tens of thousands of
dollars this summer I’ve had to eat"

Some day this cost will start being passed along to us consumers. I imagine if this carries on, at some point you simply won't be able to buy fuel at low-grade prices. You will be forced to either search for alternatives or pay a higher price. Essentially it is market induced rationing of certain blends.

So when does this all get smoothed out? When will we get our tightly supplied (expensive), yet reliable deliveries back on track? Sure, there is the supply side to look at. When all the refineries of the Midwest get back up and running our supply will increase. Take into account the demand side as well:

"Refineries across the country say they have been pushing their plants to the limits to keep up with demand in the past year or so..."

Rightly so. Our own thirst for petrol is also partly to blame for high pump prices. It doesn't help that oil has sneaked up on its record high from last August either. So this is only the start and volatility should be expected. You can quit waiting for Supply Side Salvation now and do something more pragmatic.