My Daughter

My Daughter
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Tuesday, August 23, 2005

Hoarding Gas and Oil

During the 1973-74 oil embargo, gas prices doubled within days. Gas rationing resulted in hoarding, and Western economies accustomed to cheap oil sputtered into recession. Rationing of gasoline forced many motorists to wait hours in long lines at gas stations to obtain just a few gallons. Drivers of vehicles with license plates having an odd number as the last digit were allowed to purchase gasoline for their cars only on odd-numbered days of the month, while drivers of vehicles with even-numbered license plates were allowed to purchase fuel only on even-numbered days. People rented their license plates for the day if they had gas and others didn’t.

People slept in their cars overnight to be in the front of the line. You couldn’t buy a locking gas cap, gas can, or siphon device to save your ass. People punched holes in your gas tank with a chisel to get around the locking cap. Fist fights broke out at the pump, tempers flared, guns were drawn; people got hurt.

There was some black market gasoline hoarding. Some people hoarded it for their own use. You would often see two or more 5 gallon Jerry-cans strapped to the bumper of cars or in the backseat. The “approved only” gas containers grew out of this time, as people would fill up milk jugs or glass bottles at the pump. It wasn’t about the price of gas; it was about getting any at all.

On the world scale, there is a degree of hoarding as well. It is called the Strategic Petroleum Reserve (SPR). This time around, I think it could have a far larger impact, as it will be a new source of global demand.

The U.S. SPR is the largest stockpile of government-owned emergency crude oil in the world (700 million barrels). The oil is stored in huge underground salt caverns along the coastline of Texas and Louisiana. Established in the aftermath of the 70’s oil embargo, the SPR provides the President with a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy. It also allows the United States to meet part of its International Energy Agency obligation to maintain emergency oil stocks, and it provides a national defense fuel reserve.

Developed nations across the globe started to build their own strategic oil reserves in response to the oil crisis in the 1970s. Currently, oil reserves of the United States, Japan and Germany can meet these countries' oil demands for 158, 161 and 127 days, respectively. As oil prices continue to skyrocket, oil-guzzling developed nations are taking measures to increase their strategic oil storage.

China is building a national strategic petroleum reserve that will consist of three tank farms, co-located with major refineries, and will be built and filled in phases, with the first phase using its own oil. According to Zhenhai Strategic Oil Reserve Administration in east China's Zhejiang Province, 16 oil-tank facilities will be completed by the end of August 2005 and oil storage is expected to start by year-end.

Construction on four more oil reserve bases will be finished by the end of 2008. The strategic oil reserve will provide the equivalent of the country’s 30-day oil imports.

India is planning to set up a strategic petroleum reserve equal to 15 days of the country's oil consumption.

And who knows how much "speculator" hoarding we will see as oil prices head for the moon.

If gas rationing comes to your town, be prepared for the worst; it can and will get ugly.

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