[TheDude]

The peak oil crisis: The minimum operating level

$this->bbcode_second_pass_quote('', 'T')here has been much discussion about gasoline inventories in the US lately and rightly so. Every Wednesday morning the Department of Energy releases a snapshot of US oil and product inventories at the end of the preceding week. As US gasoline inventories fell dramatically during the past few months, it is this report, as interpreted by many buyers and sellers of gasoline, that is largely responsible for the record high prices we are paying for gasoline.

Last Thursday, after the report was issued, gasoline prices jumped nearly 10 cents in a single day. On Tuesday of this week, before the report was issued, gasoline prices fell by 10 cents a gallon based on analysts' guesstimates that inventories would increase and there would not be serious shortages this summer. It is clear that the size of our gasoline stockpile has become an important number, not only for everyone who drives, but also for the future of our economy.

The number is currently around 197 million barrels, but there is more to the story than one number. Now that we are all fixated on gasoline inventories, it is important to know that America has two largely unconnected oil worlds - the five west coast states (California, Oregon, Washington, Nevada, and Arizona) and the rest of the country. The West Coast gets its imported gasoline supplies by tanker across the Pacific. The rest of the country gets its imports from tankers across the Atlantic. As there is little transfer of gasoline between the two regions, what comes to the west coast is consumed on the west coast. Thus when one reads of a big change in gasoline imports, it is important to find out which coasts got the imports. Last week for example, 1.2 million of the 1.7 million barrel increase was on the west coast leaving very little to increase the stockpile in the rest of the country.

The next important point about gasoline stockpiles is that not all of it is useable. As gasoline is largely delivered by pipeline, barge and coastal tankers these days, a lot of gasoline is tied up in transit. Thus the amount of gasoline "trapped" in transport is substantial. This "trapped" gasoline is known as the "minimum operating level."

The Department of Energy used to publish this number, but stopped doing so a few years ago on the grounds they were not confident that it was accurate. This week, however, the old number for the minimum operating level surfaced in a 3-year-old government report and it turned out to be 185 million barrels - very close to the 197 million in the inventory. It really does not matter what the actual minimum level is, for any figure remotely close to 197 million is cause for concern. If stockpiles - on either coast - drop much more, we are going to find out, the hard way, exactly where the minimal operating level is, for that will be the day the shortages develop.

[wisconsin_cur]

This is why I am the process of collecting a month's worth (if we ration it right) of diesel (I have a VW TDI) and stabilized gasoline. Well before we have teotwawki we could have a disruption that throws everything into a spin. I will still need to get to work (I and the wife will still have our jobs). I also keep at least enough fuel in the tanks to get home.


This is something that really has me nervous because it could leap upon us at any given time. A mistake in the inventory numbers or a mistake in the estimated MOL and boom, shortages make CNN when I agree to work a double in the morning and by the time I leave that afternoon the pumps are dry as people panic and go out to fill their tanks.

Knowing my luck it would happen on the first day of a nine day work stretch.

[cynthia]

wisconsin_cur:
What makes you think if you fill up the tank, the gas will still be there when you need it? We don't park under cover nor do we have locking gas caps (at the moment). I think we'll see much siphoning as the prices leap and stations run dry.
I do fill the escort since we don't drive it much, and my hubby doesn't ever fill the van because it sits alot and it would cost a fortune.
Fortunately, we are both within biking/walking distance from our jobs.
But then we have jobs that would be greatly affected by gasoline shortages/ disruptions.
cynthia

[DantesPeak]

Check out this very long post I made on May 18, 2007 for the official US government figures on MOLs. It took me hours of research through obscure records to find. More details and further discussion at link below.


$this->bbcode_second_pass_quote('', '
')I’ve conducted some research on what the official US government guidelines on minimum operating levels of oil and gasoline are.

Apparently since 2004 the levels are 270 million barrels for oil and 185 million barrels for gasoline, according to a National Petroleum Council study on US petroleum inventory levels and refinery operations issued December 1, 2004 [note the study reaffirmed a prior gasoline inventory guideline level of 185 million barrels].

$this->bbcode_second_pass_quote('', 'A')s discussed in the 1998 NPC inventory study, U.S. petroleum inventories respond to both market and infrastructure changes in the supply system. A significant part of petroleum inventory is required to operate the product and crude supply systems and is not readily available to meet demand. In the 1998 study, the NPC redefined these inventories as “lower operational inventory” (LOI). The NPC defined LOI as the lower end of the demonstrated operating inventory range updated for known and definable changes in the petroleum delivery system. The LOI was introduced in the 1998 study in order to move away from the concept that there is some definable inventory level where supply system reliability becomes of greater concern. While generally not used by industry, the NPC recognizes LOI as a gauge to help the government assess current inventory levels.

Based on the observed crude oil inventory trends, the NPC concludes that the crude oil LOI should be a range of 260 to 270 million barrels, compared to the 1998 study conclusion of 270 million barrels. Since the 1998 study, crude oil inventory has been as low as 260 million barrels with no impact on crude oil supply to U.S. refineries. However, in September 2004, Hurricane Ivan had a significant impact on offshore oil platforms, pipeline movements, and oil imports. This created localized supply disruptions at a few refineries even though crude oil inventories were slightly above 270 million barrels. This reinforces the concept that the LOI is only one indicator of adequacy of supply and therefore a crude oil LOI range is recommended, rather than a single value, to better represent the degree of accuracy associated with the LOI methodology.

No change is appropriate at this time in the LOIs for gasoline or distillate fuel oil. Given the short time frame of this study, the potential impact of regulatory changes in diesel sulfur content on distillate inventory was not studied.

[wisconsin_cur]

$this->bbcode_second_pass_quote('cynthia', 'w')isconsin_cur:
What makes you think if you fill up the tank, the gas will still be there when you need it? We don't park under cover nor do we have locking gas caps (at the moment). I think we'll see much siphoning as the prices leap and stations run dry.
I do fill the escort since we don't drive it much, and my hubby doesn't ever fill the van because it sits alot and it would cost a fortune.
Fortunately, we are both within biking/walking distance from our jobs.
But then we have jobs that would be greatly affected by gasoline shortages/ disruptions.
cynthia

[Ayame]

$this->bbcode_second_pass_quote('wisconsin_cur', 'I') park in front of a security camerea and am good friends with security.

[wisconsin_cur]

$this->bbcode_second_pass_quote('Ayame', '')$this->bbcode_second_pass_quote('wisconsin_cur', 'I') park in front of a security camerea and am good friends with security.

[Twilight]

$this->bbcode_second_pass_quote('wisconsin_cur', 'N')o guarentees, just trying to stack the odds in my favor.

[Judgie]

$this->bbcode_second_pass_quote('cynthia', 'w')isconsin_cur:
What makes you think if you fill up the tank, the gas will still be there when you need it? We don't park under cover nor do we have locking gas caps (at the moment). I think we'll see much siphoning as the prices leap and stations run dry.
I do fill the escort since we don't drive it much, and my hubby doesn't ever fill the van because it sits alot and it would cost a fortune.
Fortunately, we are both within biking/walking distance from our jobs.
But then we have jobs that would be greatly affected by gasoline shortages/ disruptions.
cynthia

[frankthetank]

MOL-Next summer we should find out.

Wisconsin-

Don't think you can trust anyone. A cop i know had his banana stolen from him at work!!! I know there are plenty of dirty cops, but a banana! About the only one you can trust is your mother

Good luck in Minneapolis. I'd be fleeing from that mess ASAP. Never seen so many mcmansions in my life, along with the matching SUV. You are one step ahead of them by using diesel, something that won't run out as quickly. Although thinking about it, it wouldn't suprise me if soccer moms start trying to put that in the Tahoe.

[wisconsin_cur]

$this->bbcode_second_pass_quote('frankthetank', 'M')OL-Next summer we should find out.

Wisconsin-

Don't think you can trust anyone. A cop i know had his banana stolen from him at work!!! I know there are plenty of dirty cops, but a banana! About the only one you can trust is your mother

Good luck in Minneapolis. I'd be fleeing from that mess ASAP. Never seen so many mcmansions in my life, along with the matching SUV. You are one step ahead of them by using diesel, something that won't run out as quickly. Although thinking about it, it wouldn't suprise me if soccer moms start trying to put that in the Tahoe.