Supply and Demand in Disasters
Above: Truck rack for loading product to tanker truck
The fuel crisis in New York City, Westchester County, Long Island, northern New Jersey, and nearby is important. Obviously it is important to the residents of these areas. Less obviously, it is important to those of us who are involved in homeland security policy and strategy.
I have continued to aggregate fuel-related stories to the Friday post below.
In Sandy’s wake supply has not met demand. Not unreasonably, policy makers and strategists have viewed this as a lack of supply. Significant steps have been taken to increase supply. Senator Schumer pushed the US Coast Guard to reopen the ports of New York and New Jersey to fuel deliveries. Secretary Napolitano waived the Jones Act which allows foreign shipping to deliver fuel into the ports. President Obama ordered the military to deliver fuel into the hardest hit areas.
All of these steps have increased supply to the mid-Atlantic and served to suppress price increases. Many far removed from the New York metro area are benefiting from gasoline price reductions related to these steps to increase supply. It has been a vigorous response.
It is not, however, targeted at the present problem. Supply itself was never the problem. There are two fundamental problems:
The fuel distribution terminals have been damaged and have not had electricity. South and east of Newark Airport and just west and north of Staten Island is a handful of places where pipelines and tankers deliver gasoline (Google Map). All of these venues lost power. None of these venues were on the utility’s priority restoration lists. The utility — and most policy-makers and strategists — did not know the role nor even the existence of these places. This is where tanker trucks pull into truck racks and gasoline is pumped from storage tanks and blended into tanker trucks which then proceed to various gas stations. There has been no electricity to operate the truck racks and that’s a fundamental problem. There are other problems with debris removal, personnel, damage to the storage tanks, and communications as to which gas stations have power, but these problems have not been the most serious impediments.
Two-thirds (or more) of gas stations have not had electricity to run their pumps and otherwise transact business. Many gas stations have plenty of gasoline, but do not have electricity to pump that gas. Why, you might ask, do gas stations not have back-up generators to pump their gas? This is required in Florida and, maybe (?), Louisiana. It has been successfully resisted in most other jurisdictions partly because it would further diminish the number of independent operators and enhance the market dominance of chains. Most gas stations would lose money on gasoline sales alone and make their (very small) profits on selling salty and sugary snacks, soda pop, beer, and cigarettes. The capital and personnel requirements for purchasing and safely maintaining a generator for conducting sustainable commerce — not just pumping gas — are significant especially for the smaller independent operator.
There are a range of policy and strategy options to address these fundamental problems. In the next two weeks is the right time for New Jersey, New York, Connecticut, and others to actively and inclusively consider these options.
It is also my impression — but I don’t have sufficient evidence to prove — that from Tuesday morning to Thursday afternoon/evening, these fundamentals were not being communicated to Governors Christie and Cuomo, Mayor Bloomberg, and other senior policy makers and strategists. As a result, considerable energy, time, and effort were being expended on measures that were peripheral to the current problem and may have distracted from resolving the truck rack problem identified above. This, too, is an issue worth considering while memories are fresh and more accurate after-action outcomes can be specified.
To be explicit: There is absolutely no evidence of anyone being negligent or passive (quite the contrary). There is evidence that a crisis, as usual, has exposed aspects of reality that now deserve sustained and thoughtful attention.
