Gasoline prices are falling, but you can’t buy the stuff.
In the wake of one hurricane and in the face of another, the price of gasoline — as measured by gasoline futures — declined last week, even as the U.S. gasoline inventory was drawn down. You’d think that gasoline prices should be spiking, but spontaneous orders are sometimes counterintuitive: Hurricane Harvey temporarily shut down a significant portion of the nation’s oil refineries, reducing the demand for crude and resulting in slightly lower oil prices. But our refineries are pretty robust, and investors have calculated that the temporary reduction in refining capacity will be reversed quickly, with that fuller productivity coming back online just as the high-demand summer driving season comes to an end — and as what economists forthrightly call “demand destruction” lowers consumption of gasoline in the storm-ravaged coastal regions of Texas and Florida. And so the price of gasoline futures, which are essentially bets on the future price of gasoline, have declined.
Between 2007 and 2014, Florida’s daily gasoline consumption shrank significantly — by about 90,000 barrels. In 2012, two Caribbean refineries that had supplied Florida with a significant share of its gasoline were idled, leaving Florida more dependent upon refineries located along the Gulf Coast. That’s all well and good when the weather is fair, but Hurricane Harvey disrupted things. For one thing, it forced the shutdown of several refineries in the Houston area. For another, it made navigating the Gulf of Mexico treacherous — you don’t want to sail an oil barge into a hurricane. And there is no gasoline pipeline connecting those Gulf Coast refineries to Florida: that trade is conducted by boat. Pipelines are the cheapest and safest way to move petroleum products from producers to consumers, but America’s fanatical environmentalists, who oppose the development of new energy infrastructure categorically, have been remarkably successful in blocking or delaying the development of new pipelines, as well as other projects, such as coal-export terminals connecting U.S. producers to Asian markets.
And things probably will return to normal in Florida fairly quickly, too. But we should not be complacent: Unlike earthquakes and terrorist attacks and the North Koreans, hurricanes are predictable. We get a few days’ warning and time to prepare for them, which makes them a pretty good test of our national readiness for different kinds of stresses and disruptions. Harvey provided an excellent reminder that Texas has the good luck to be full of Texans, and while Florida Man, that infamous character, will no doubt make his appearance during Irma, Florida is a well-governed state with excellent resources and long experience in weathering the weather.
Unlike earthquakes and terrorist attacks and the North Koreans, hurricanes are predictable.
Still, would be nice to have some gas.
Florida is not connected to Texas by a gasoline pipeline, but the large urban centers of the Northeast are, and Harvey temporarily cut them off, forcing the closure of the Colonial pipeline, which carries gasoline as well as heating oil and aviation fuel to New York City and beyond. Colonial and 20-odd refineries supplying it were closed out of an abundance of caution, which is of course what’s wanted when dealing with such volatile substances as gasoline and avgas. Colonial was reopened on Tuesday, much to the relief of our Yankee friends.
But what if it weren’t?
Fossil fuels are very much a part of the old economy. Oil producers and refiners do not enjoy the digital world’s capacity for rerouting their product instantaneously in response to changing conditions. Refineries are big and sprawling, and pipelines are right where they are and nowhere else. Sure, we can put fuel on boats, trucks, and trains, but many of the circumstances that would disrupt the pipelines would also threaten to disrupt highway traffic, the railroads, or the functioning of our ports. And there are only so many tanker trucks and oil barges: One of the reasons why Florida’s gasoline market is so tight is that the fleet serving its markets is not very large and enjoys relatively little surplus capacity. If not exactly fragile, these systems certainly are not what Nassim Nicholas Taleb would call “antifragile,” and it surely has occurred to the generals in Pyongyang and the ayatollahs in Iran that there are ways to disrupt them well short of something so dramatic as a nuclear weapon. But there are nuclear weapons in the world, too.
There are complex questions involved in this, but where the energy infrastructure is concerned, there is one fairly obvious solution: more. More pipelines, more refineries, more generating capacity, more nuclear plants, more production. This is not a call for a gigantic federal infrastructure project or a five-year plan. It is a call to let markets work. The United States is blessed with enormous stores of oil, natural gas, coal, and other energy resources, but we do not make nearly as extensive or efficient use of them as we could. The Trump administration, especially EPA chief Scott Pruitt, deserves some credit for taking baby steps in the right direction, for example by approving the Keystone XL pipeline. But there is much more to be done, from building pipelines to splitting uranium atoms, and the regulatory apparatus remains a critical obstacle.
Can we handle a couple of hurricanes? Sure. But the world contains uglier truths and wilder dangers — and the world knows where we live. In 2001, 19 misfits with box-cutters changed the course of world history and showed us that we were by no means prepared for the future — or even for the here and now. A little bit of weather can seriously disrupt Americans’ ability to provide themselves with food, fuel, and the other necessities of life. There are worse things than the weather, and we’d better get ready for them.
Why the Liberal Media Scolded the Cajun Navy
No, Hurricanes Are Not Good for the Economy
Houston Is Not ‘Paying the Price’ for Bad Land-Use Policies
Photo Gallery: Florida Braces for Hurricane Irma
— Kevin D. Williamson is National Review’s roving correspondent.