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Refinery Outages Cont.....

Insight 8. Regardless of whether price or some other type of rationing is used, someone, somewhere will need to go without refined product, if it is not available. If there is not enough diesel to go around, some trucks will not be able to make deliveries or some road making equipment will not be able to operate. If there is not enough jet fuel for all of the airplanes, some flights will have to be cancelled. Some auto trips will have to be eliminated. Insight 9. If 5 million barrels of refinery production is taken off-line, this is equivalent to a little over 25% of US refined product usage. We would hope that the amount of refinery production off-line would drop fairly quickly, but it could be several days before it drops from the current 5 million barrels off-line. It will be impossibile to make up this huge shortage with imports of refined products from overseas, or the use of winter grade gasoline in summer. Edit: See reference table at the end of this article to see EIA data to compare to these amounts. Because shortages are likely to vary by part of the country, depending on pipeline service to the area, it is quite likely some areas will experience shortages of 25% for several days, even if loss in refined product declines to "only" a shortfall of 2 million barrels a day, which equates to 10% of current usage. At 10% of current product usage, there would be a shortfall of gasoline of about 900,000 barrels a day. Insight 10. Because some areas are likely to be very short of supply, it is likely that gasoline prices would need to rise to $10 a gallon or more in those areas, to cut back demand sufficiently. In some areas, there may be temporary shortfalls of 25% of more of gasoline supply. To allocate such short supplies would take a very high price. Government officials are not likely to let this happen. Instead, we are likely to see many stations that are completely out of gasoline, and other stations with long lines, selling at most 10 gallons per customer. Insight 11. The lack of diesel, gasoline, and jet fuel is likely to cause feedbacks to the rest of the economy. If people are forced to cut back on gasoline use, they are likely to cut back considerably on trips to restaurants and other discretionary trips. Restaurants that were doing poorly before will find their business much worse. Restaurants on the brink of bankruptcy may be forced over the edge. Some people will suddenly find their incomes lower (for example, gasoline station owners who have no fuel to sell; waitresses in restaurants; truck drivers whose trips are reduced). These people will find it more difficult to pay their bills than previously. Some may default on mortgages and credit card debt. Insight 12. We will all get to see first-hand a little of what the impact of peak oil is likely to be. When there are shortages of fuel, people can be expected to hoard supplies. This may cause shortages to be worse than they would otherwise be. Co-operation could go quite a way to solving day-to-day problems. We will get to see to what extent this actually comes into play. Allocation by price has long been advocated as the American way. We will get to see how long this lasts when there is clearly not enough supply at prices voters consider "acceptable". Credits the Oil Drum dot com


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