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Analyzing the Transportation Fuel Constraints During Emergencies

Apr 26, 2016

The importance of transportation fuels – gasoline and diesel – during emergency situations come to the public’s attention after natural disasters, such as Hurricane Sandy.

When there is no electricity, fuel cannot be pumped at gas stations unless they have backup generators; which many don’t have.  States, such as New York, New Jersey, Florida, and Louisiana, are legislating and providing grants for the purchase and installation of generators, as well as transfer switches at some gasoline stations. However, three other factors can constrain access to transportation fuels during emergencies:  federal anti-trust laws; the “just-in-time” business model adopted by the petroleum industry; and the use of reformulated gasoline.

Although federal anti-trust laws protect business competition, they forbid petroleum companies from sharing supply availability and pricing information.  Third parties, usually in the form of industry associations, aggregate the data sets to provide anonymity and comply with the laws.  These generalized data are used to determine the severity of fuel shortage and the selection of mitigation measures to ensure adequate fuel supply.

After the OPEC oil embargo took place in the late 1970s, petroleum companies began changing their business practices by shifting to a spot market and reducing wholesale- and retail-stored product in order to increase profits and remain competitive.  As a result, supply is moved to retailers just-in-time to meet their sales quota.  As a result, gasoline prices are more volatile and less gasoline is available on-hand in times of emergency.

Reformulated gasoline can serve as a constraint when states that use an alternative formulas suffer from fuel shortages and must draw fuel supply from neighboring states that use a different blend.

States and localities that coordinate with industry representatives and associations must work cooperatively to identify and remedy fuel shortages in order to minimize the impact of these constraints. 

Written by: Velda Frisco