Secret Post-Hurricane Plan Taps Into 1.4 billion Gallon Reservoir

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Secret Post-Hurricane Plan Taps Into 1.4 billion Gallon Reservoir
– by Not-New York Times reporter Greg Rehmke

Congressmen and journalists nationwide were upset to be upstaged by a secret oil industry plan to respond to hurricane Katrina (secret only because journalists were unable to comprehend it and report upon it). The oil industry plan drew upon the distributed knowledge and incentives of all Americans with automobiles in tapping into a vast virtual 1.4 billion gallon gasoline reservoir.

The oil industry was unable to predict exactly how much gasoline refining capacity would be knocked out by Katrina, nor how long it would be out. Nor could they predict exactly how much gasoline would be available in regions near Katrina and supplied directly by Katrina-hit refineries. Working through a network of thousands of gasoline-distribution planners, oil industry experts unveiled a complex plan to enlist cooperation not only employees, but also firms they sell gasoline to, and, astonishingly, all their customers.

Customers were asked to individually examine driving patterns and make their own decisions on ways to reduce gasoline purchases. Customers had no way of knowing how easy or hard it would be for their neighbors to conserve scarce gasoline supplies. Somehow, an entire nation of automobile drivers had to arrange their response to Katrina with the also unknown details of just how much refinery supply was knocked out. And they had to somehow continue this coordinated response day-by-day through the entire duration of supply constraints.

Wealthy investor Don Smith (not his real name), on his way Saturday from Pittsburgh to Houston, revealed his part in this nationwide Katrina-response plan: “Not since high school had I bought just $5 or $10 of gas at a gas station.” When asked, Mr. Smith confirmed that he could afford a full tank of gas. But since he expected the price to fall once refineries were repaired, he chose not to fill up. He noted also “I couldn’t easily switch to a smaller car, but I make sure now to accelerate more slowly onto the freeway, and to brake less.” As the crisis passed in the Pittsburgh area, and gasoline prices dropped to $2.19 a gallon (as of October 29), Mr. Smith said he expects to replenish his automobile’s private reservoir the next time he visits an area gas station.

Central to the nationwide response, now seen by most as amazingly successful, was consumers’ ability to tap into their own individual gasoline reservoirs during the supply emergency.

However, since this oil industry response plan involved market concepts and demand-management through price changes, it was unfortunately beyond the comprehension of most legislators and journalists. Legislators responded by calling for a “windfall tax” on profits generated by higher gasoline prices. Interestingly, television news viewership, as well as sales of newspapers and magazines, jumped significantly in response to hurricane Katrina. No word yet whether Congress plans to similarly tax media windfall profits.

Notes on numbers: 200 million cars in U.S. with average tank size of 14 gallons (at least my Volkswagon has a 14 gallon tank, which, pre-Katrina, averaged one-half full and post-Katrina averaged one-quarter full). With these numbers, the nationwide private gas-tank reservoir capacity is 2.8 billion gallons. If it averaged one-half full when Katrina hit, there were 1.4 billion gallons available for individual consumers to draw upon. 700 million of these gallons could be used before the average driver’s tank hit one-quarter full. I can only speak for myself and wealthy investor Don Smith (not his real name): We both drew our tanks down and kept them down as long as prices stayed up.
— Greg Rehmke, reporting from Pittsburgh and Seattle