Dissecting the Shortage

Could officials have done more before, during fuel crisis? And what about next time?

Published in CSP Daily News

ATLANTA -- On August 28, Georgia Governor Sonny Perdue officially designated September as "Preparedness Month." The state, Perdue said, had developed an "ambitious and proactive" campaign with a name that bespoke vigilance: Ready Georgia. Two weeks later, however, Georgians learned just how unprepared the state was for a rapidly emerging crisis in: a gasoline shortage.

Even as Perdue signed the preparedness proclamation, the area's gasoline supply chain was threatened. Hurricanes Gustav and Ike shut down 15 oil refineries in Louisiana and Texas, and Atlanta's worst gasoline shortage in [image-nocss] memory was under way, reported The Atlanta Journal-Constitution in its analysis of the situation.

"No one was surprised," Jim Tudor, president of the Georgia Association of Convenience Stores, who consulted with state officials on their response, told the newspaper. "But it's very difficult to plan. The reality is, state government can't make gas."

The shortage finally eased late last week, said the report. But questions remain, it added, about whether state officials could have done more to prevent a disruption in fuel supplies or should have reacted more aggressively as shortages spread. It also remains unclear whether Georgia will be any better equipped to deal with similar situations in the future.

Several factors converged to exacerbate metro Atlanta's shortage, state officials and oil industry executives said. The region gets almost all its fuel via pipeline from the Gulf Coast, and each of the recent hurricanes damaged or cut power to most of the refineries that supply the pipelines. Then, just after Ike made landfall, crude oil futures spiked, setting off a run on gas stations. Intensive media coverage—with live shots of long lines at stations—might have kept the crisis alive.

Chris Clark, executive director of the Georgia Environmental Facilities Authority, which manages the state's energy emergency plan, told the paper, "Our approach was measured. It was prudent."

The gasoline shortage, he said, was not severe enough statewide to warrant drastic intervention, such as closing schools or rationing fuel. "That's something that's reserved for the worst-case scenario for the whole state," Clark said. "We needed to have tools available if things got worse."

Perdue's aides said the governor stayed on top of the gasoline situation, taking part in daily briefings, even while traveling to Spain on a trade mission, said the report, but critics complained of a lack of leadership. Cobb County Commission chairman Sam Olens, a Republican who may run to succeed Perdue as governor in 2010, called the state's response "wholly inadequate." And fuel distributor Tex Pitfield, CEO of Saraguay Petroleum in Atlanta, said he suggested directly to Perdue that the state ration gasoline supplies. His suggestion, Pitfield wrote in an op-ed article cited by the Journal-Constitution, "fell on deaf ears."

State officials attacked the shortage mainly around the edges, critics said, with the governor at one point declaring that Atlanta had "ample fuel" and that no crisis existed. Perdue also asked Georgians to drive slower, avoid idling in their cars and properly inflate their tires to conserve fuel. The governor eventually appealed to federal regulators to suspend rules requiring cleaner fuel for metro Atlanta. By then, however, the problem was not that the metro area could not get enough of its special blend; it could not get enough gasoline of any kind, said the report.

Members of the governor's staff, other state officials and representatives of the oil companies, pipeline firms and gasoline distributors have conducted regular conference calls since the hurricanes struck to discuss fuel supplies. "We relied on the industry experts and their associations to give us the best data they had to make the best decisions we could," said Clark.

At first, said Tudor, "we did not know—nor did anyone know—how much the infrastructure would be damaged."

At the group's urging, the state eased rules for fuel trucks and drivers, hoping to speed delivery of any gasoline that became available. But the group did not ask Perdue to fully activate the energy emergency plan, which could have set minimum and maximum purchases at stations and restricted the days on which motorists could buy fuel.

Some states took more aggressive actions, according to the report. South Carolina restricted nonessential travel by government employees, while North Carolina officials made arrangements to truck in fuel from areas with greater supplies.

But Georgia officials say they could not have done more to ameliorate shortages. Nor, they say, can they guarantee future supply disruptions will not occur. Stockpiling gasoline for emergencies would be expensive; tank farms would have to be constructed and stocked. Further, gasoline begins degrading after a year or so, meaning that large reserves could become useless.

"We don't have the infrastructure to be able to do that," said Shane Hix, a spokesman for the environmental facilities agency. "The state of Georgia doesn't own any [reserve] fuel storage."

Getting fuel from somewhere other than the Gulf Coast also presents problems, said the report. The pipelines that serve metro Atlanta originate in the Houston area and in southwestern Louisiana. Neither hurricane harmed the lines. But because the storms damaged some refineries and knocked out power to others, little fuel could be pumped through the underground network. Coastal areas of the Southeast, such as Savannah, do not rely on pipelines, but rather on massive tanker ships, to deliver gasoline and other petroleum products. Metro Atlanta, like other inland regions, cannot do that. Hix said the state will look into transporting fuel from Atlantic Coast ports to the Atlanta area in the future.

The reliance on Gulf Coast gasoline became more critical this year than it was the last time two hurricanes struck the region. In 2005, enough time lapsed between Katrina and Rita for some refineries damaged in the first storm to get back on line before the second hit, said Steve Baker, a spokesman for Alpharetta-based Colonial Pipeline, one of two companies that pipe fuel to the South and the Eastern Seaboard.

Gustav made landfall on September 1. Ike hit on September 13. But the run on stations did not begin until the following week, after crude oil prices rose dramatically—from $91 a barrel to $104—in three days, according to the U.S. Energy Information Administration.

Tudor said panic buying, fed by continuous news coverage, created the shortage."We'll have a shortage as long as people believe we have a shortage," he said. "As soon as people believe there is going to be gas tomorrow, they won't feel the necessity of trying to fill up today."

Just as oil prices spiked, Atlanta TV stations began "trumpeting short supplies of gasoline and empty tanks at stations," former WAGA-TV reporter Doug Richards, told the paper. Most reporters, he said, pleaded for calm, urging motorists not to buy unneeded fuel. But those pleas, Richards said, may have backfired. "I'm reluctant to say TV helped contribute to the panic; however, certainly a lot of those consumers of gasoline watched TV and put two and two together" and headed out to buy fuel.

The shortage was a natural TV story, Richards said, combining human drama—angry, anxious motorists—with strong visuals of cars lined up for gasoline. "The media didn't cause the supply in the pipeline to be diminished," Richards said. "The media didn't cause the hurricane."

To read a Journal-Constitution Q&A further dissecting the shortage, click the Download Now button, below.