The How and Why of the Current Southeastern Gas Shortage

Best Of, Economics, Energy, Local, Petroleum

Updated: 9/29/2008:

Petroleum Pipelines

Petroleum Pipelines

The news headlines are full of the current gasoline shortage, here in Middle Tennessee, with pictures of gas stations desolate, and barren, or with lines stretching off into the distance.  Why is this crisis striking Middle Tennessee, but not Birmingham, or Huntsville, or Atlanta? 

Update: 9/29/2008:

This website shows the ongoing conversation in the oil trading industry, concerning this the fuel shortage, and may provide some insights on why the shortage is spreading.


How Oil Gets to Nashville

Oil gets to Nashville via the Colonial Pipeline, which as you can see by the map is a direct run through the heart of the southeastern United States.  You might also notice that while the pipeline runs through the southeast, it doesn’t run through Tennessee.   That would of course, be due to the Appalacian Mountains.  Thus, Chattanooga, Knoxville, and Nashville are all fed on branches of the main pipeline, as shown above.

The pipeline is owned and operated by the Colonial Pipeline Company, based out of Alpharetta Georgia, which is wholly owned the following list of stockholders:

  • 15.80% - Industry Funds Management
  • 8.53% - ConocoPhillips Pipe Line Company
  • 23.44% - HUTTS, LLC
  • 28.09% - Koch Capital Investments Company, LLC
  • 8.02% - Phillips Petroleum International Investment Company
  • 16.12% - Shell Pipeline Company LP

The first shareholder, Industry Funds management is a “leading global alternative wholesale funds manager specializing in infrastructure…” out of Melbourne Australia.  The second “unknown” shareholder is HUTTS, LLC, which a little research shows, is also a significant equity holder in Chevron, and the former 100% owner of Unocal. And the third, Koch Capital Investments Company, LLC is “a global privately held company based in Wichita Kansas… …involved in refining and chemicals; process equipment and technologies…“.

Every other shareholder in this firm is an oil company

So they appear to be folks who’d be competent at delivering the goods.

Colonial Pipeline Route

Colonial Pipeline Route

From the Colonial Pipeline Company’s website, they deliver “over 100 Million gallons of gasoline, home heating oil, aviation fuel and other refined petroleum products to communities and businesses throughout the South and Eastern United States.

How the Pipeline Operates

Each batch of petroleum product that gets delivered by the pipeline moves on average between 3 and 5 miles per hour.   This means that that to deliver product to Nashville, (roughly 1,000 miles) from the head end of the pipeline in Houston takes 8 days.

It’s important to remember that the pipeline is a shared resource, shipping batches of various products.  The smallest batches run from 75,000 barrels (55 gallons per barrel) and batches can be as large as 3,200,000 barrels.  Of course, that’s on the main pipeline.  As you recall, Middle Tennessee is on a smaller spur off the main line.

Which brings us to where things get interesting.

Hurricane Gustav shutdown the pipeline when it rolled ashore the Louisiana coast, by taking out electrical power required to keep the pipeline moving, and shutting down the refineries, preventing production of fuel, at the source.  Within 2 weeks, Hurricane Ike stormed across Houston, and left power outages and further delaying production.  

To their commendation, the Colonial Pipeline Company employees and local governments worked to expedite bringing the pipeline back on-line, but until fuel production came back up to pre-storm levels, the pipelines are running at a lower speed.

The spur line which feeds Middle Tennessee draws from the main pipeline at Alpharetta, but when there’s limited fuel to push down the spur line, shortages occur.  The Colonial Pipeline Company is ready to resume full delivery, as soon as there is fuel to deliver.

The refineries are coming back online, but are being hampered by the need for adequate supplies of industrial gasses used in the refining processes.  The hydrogen gas used in refineries to process petroleum comes predominantly from natural gas, so crews returning to offshore platforms will bring back into production roughly 15 percent of the country’s natural gas.

A summary of Gulf coast refiners show that Valero Energy began the multi-day restart process at their Houston and Texas City refineries. Conoco reports it’s refineries in Lake Charles and Alliance, LA are increasing production levels after their restart after shutdown for Hurricane Gustav.   Shell said it’s Motiva joint venture refinery in Norco LA is at normal production rates, and it’s Convent, LA refinery has begun production of motor fuel, this past weekend. 

Additionally, the Louisiana Offshore Oil Port, the only U.S. deep water port for delivery of crude oil reports it’s running at full rates, while offloading tankers.

So it looks like production is moving back towards historically nominal levels, and within 7-8 days we should be out of the current fuel crisis, here in Nashville.

Update: 9/29/2008:

Watching the server logs, I’m seeing that this story still has legs, and more importantly, that the shortage appears to have spread to include Atlanta, Western North Carolina, and other communities.   If you’re being affected by this shortage, leave me a comment with where you are, as I want to track the overall patterns of this series of shortages.

4 Responses

  1. DeathByChocolate  •  September 22, 2008 @12:44 pm

    Well, at least some of this makes sense now. But 7 - 8 days? That’s a long time to wait for gas. That won’t get me to and from work in the meantime. We seriously need backup plans for this kind of thing.

  2. Ivy  •  September 23, 2008 @9:26 am

    Well, this explains a lot! Thanks for posting about this, I was wondering how this all worked.

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