With gas prices in Newton County now well below $3 a gallon, is it time to break out in a rendition of "Happy Days are Here Again?" Not exactly.
The recent gas "crisis," as described by many media outlets, was simply a symptom of a greater problem - the fragile nature of our gasoline supply and distribution systems and the dependence of the Atlanta metro area (including Newton County) on supplies coming from the hurricane-prone gulf region. Unless a cure can be found for the hurricane problem, we can expect to revisit this issue again in the future.
As one who was involved working with state officials both before and during the "crisis," I heard the many calls for the state to "do something." It's interesting that we as a society think somehow the government can magically solve our problems instantly. But consider the following:
• The state does not make any gas. Not a surprise but our current system depends on a supply system originating in the gulf. Although Hurricane Katrina did a lot more physical damage, the recent combination of Hurricanes Gustav and Ike took more of the supply that Georgia depends on out of production. Gustav took out facilities in the New Orleans area and Ike likewise did the same for the Houston area. No storm or combination of storms in recent memory have had such an impact.
• Calls for instituting a "minimum purchase" requirement do not recognize the current way in which gas is marketed - primarily through a pay at the pump method. Pay at the pump will work by limiting the maximum amount of purchase, but minimum purchases would have to be directed through the store. Considering that many stores today operate with as many as 48 fueling positions, such a program would insure that there would be as many as 48 people waiting in line at locations just to pay for their gas. At about a minute and a half per transaction, your average wait time could easily approach an hour, in addition to any wait times just to get to the pump.
• Odd/Even was another "call to action." This action plan evolved from the '70s Arab embargo, an era when most stations were full service and much smaller. In a self-serve environment dominated by pay at the pump, who would enforce this?
There are things that government can do. First, the state should lobby Congress and the Federal Environmental Protection Agency to eliminate the boutique fuel "Atlanta gas" that must be used in the 46 counties surrounding Atlanta. If not eliminated, the procedure by which alternative fuels can be made available to our region must be simplified.
Currently we are at the mercy of the Federal EPA to determine whether an emergency exists and approve other fuels. State officials were in constant contact with the feds and had to build a case before we had more options.
Another needed state initiative involves the development of a public information campaign to help cut down on panic buying and topping off during periods of supply shortfalls. The reality is that much of our problem with locations being out of fuel was a result an artificially high demand, rather than a shortage of supply.
For instance, during a period in which many Newton County locations were out of fuel, actual supply had returned to 80 percent of normal. A week later, thanks to more positive media coverage, the problem had basically solved itself even though the supply had only increased another 20 percent. The difference was that motorists began weaning themselves from the need to fill up every day. Once this process began, the shortage problem changed quickly to the positive.
The fuel storage system does not have enough capacity that everyone can drive around with a full tank of gas. If everyone decided to do this today, we would still run out of gas without any corresponding weather event. When you top off during an emergency, you basically drive around with someone else's gas.
The long term solution involves issues that must be resolved at the federal level. Calls for additional refinery capacity, pipelines, alternative supply production and others must be addressed. A proposal for additional pipeline capacity into Atlanta remains stalled. There remain too many boutique fuels throughout our country which exacerbate shortage situations.
The "crisis" also generated a ton of rumors about other potential causes of the problem. My favorite was that "the reason that QT had fuel more often than many other retailers was because it was owned by George Bush." Other rumors described fuel being held by retailers who had product but wouldn't sell it because they were waiting for the price to go up. As described below, such rumors fly in the face of our business reality and the need to maintain fuel at our stores.
No one enjoyed the recent "crisis." Retailers who were without gas found themselves at a severe competitive disadvantage against those who still had product and lost most of their inside sales, where most money is actually made.
Higher gasoline prices also impacted inside sales as customers had to pay a higher percentage of disposable income on fuel, rather than more profitable items. The perception that higher gasoline prices equals higher profits does not take into account that cost increases often outstrip retail changes.
It's nice to see lower prices and increased availability return to Newton County. May the "crisis" be a catalyst for us to encourage stakeholders to address some of the systemic issues that were the real cause of the shortfall problem. Otherwise, be sure to smile at the TV camera when you are filmed waiting in a long line sometime in the future.
The recent gas "crisis," as described by many media outlets, was simply a symptom of a greater problem - the fragile nature of our gasoline supply and distribution systems and the dependence of the Atlanta metro area (including Newton County) on supplies coming from the hurricane-prone gulf region. Unless a cure can be found for the hurricane problem, we can expect to revisit this issue again in the future.
As one who was involved working with state officials both before and during the "crisis," I heard the many calls for the state to "do something." It's interesting that we as a society think somehow the government can magically solve our problems instantly. But consider the following:
• The state does not make any gas. Not a surprise but our current system depends on a supply system originating in the gulf. Although Hurricane Katrina did a lot more physical damage, the recent combination of Hurricanes Gustav and Ike took more of the supply that Georgia depends on out of production. Gustav took out facilities in the New Orleans area and Ike likewise did the same for the Houston area. No storm or combination of storms in recent memory have had such an impact.
• Calls for instituting a "minimum purchase" requirement do not recognize the current way in which gas is marketed - primarily through a pay at the pump method. Pay at the pump will work by limiting the maximum amount of purchase, but minimum purchases would have to be directed through the store. Considering that many stores today operate with as many as 48 fueling positions, such a program would insure that there would be as many as 48 people waiting in line at locations just to pay for their gas. At about a minute and a half per transaction, your average wait time could easily approach an hour, in addition to any wait times just to get to the pump.
• Odd/Even was another "call to action." This action plan evolved from the '70s Arab embargo, an era when most stations were full service and much smaller. In a self-serve environment dominated by pay at the pump, who would enforce this?
There are things that government can do. First, the state should lobby Congress and the Federal Environmental Protection Agency to eliminate the boutique fuel "Atlanta gas" that must be used in the 46 counties surrounding Atlanta. If not eliminated, the procedure by which alternative fuels can be made available to our region must be simplified.
Currently we are at the mercy of the Federal EPA to determine whether an emergency exists and approve other fuels. State officials were in constant contact with the feds and had to build a case before we had more options.
Another needed state initiative involves the development of a public information campaign to help cut down on panic buying and topping off during periods of supply shortfalls. The reality is that much of our problem with locations being out of fuel was a result an artificially high demand, rather than a shortage of supply.
For instance, during a period in which many Newton County locations were out of fuel, actual supply had returned to 80 percent of normal. A week later, thanks to more positive media coverage, the problem had basically solved itself even though the supply had only increased another 20 percent. The difference was that motorists began weaning themselves from the need to fill up every day. Once this process began, the shortage problem changed quickly to the positive.
The fuel storage system does not have enough capacity that everyone can drive around with a full tank of gas. If everyone decided to do this today, we would still run out of gas without any corresponding weather event. When you top off during an emergency, you basically drive around with someone else's gas.
The long term solution involves issues that must be resolved at the federal level. Calls for additional refinery capacity, pipelines, alternative supply production and others must be addressed. A proposal for additional pipeline capacity into Atlanta remains stalled. There remain too many boutique fuels throughout our country which exacerbate shortage situations.
The "crisis" also generated a ton of rumors about other potential causes of the problem. My favorite was that "the reason that QT had fuel more often than many other retailers was because it was owned by George Bush." Other rumors described fuel being held by retailers who had product but wouldn't sell it because they were waiting for the price to go up. As described below, such rumors fly in the face of our business reality and the need to maintain fuel at our stores.
No one enjoyed the recent "crisis." Retailers who were without gas found themselves at a severe competitive disadvantage against those who still had product and lost most of their inside sales, where most money is actually made.
Higher gasoline prices also impacted inside sales as customers had to pay a higher percentage of disposable income on fuel, rather than more profitable items. The perception that higher gasoline prices equals higher profits does not take into account that cost increases often outstrip retail changes.
It's nice to see lower prices and increased availability return to Newton County. May the "crisis" be a catalyst for us to encourage stakeholders to address some of the systemic issues that were the real cause of the shortfall problem. Otherwise, be sure to smile at the TV camera when you are filmed waiting in a long line sometime in the future.
Jim Tudor is the president of the Georgia Association of Convenience Stores.
