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By Robert Rapier on Jul 12, 2007 with no responses

The Risk of Maintaining Low Inventories

All through the spring and early summer I kept pointing to falling gasoline inventories as a potential problem. Running inventories down to very low levels greatly increases the risks associated with any supply disruptions. And while inventories have been recovering, they are historically still very low. And we have our first real casualty of running on such a razor’s edge:

Some Gas Pumps Run Dry

OMAHA, Neb. — Truckers spent more than an hour waiting to fill up with fuel for delivery as some gas pumps ran dry across the state on Wednesday.

Nebraska’s governor has issued an executive order that will allow gasoline truck drivers to alter their hours of service.

Gas supplies in the state have been tight after flooding in Kansas last week. Industry experts said high waters submerged a Coffeyville, Kan., refinery and waters could keep the 108,000-barrel-a-day facility shut down for most of the summer.

That’s one of those supply disruptions that I was talking about. I was more worried about a hurricane, but any accident or natural disaster that takes a refinery out of service in this tight market has the potential to cause shortages.

Truckers lined up at 2205 N. 11th in Omaha, one of the depots where fuel is loaded up and distributed to the filling stations. The Magellan Petroleum Terminal had waits of more than an hour on Wednesday.

There was no fuel at some other area terminals, including one in Lincoln.

“They’re running out up north, so they’re coming down here or taking it from here up there,” said Wynne Transport Service’s John Neff.

Some gas station owners told KETV NewsWatch 7 that they worry this temporary slow down not only leads to higher prices but could leave them without fuel for periods of time. At least three stations around the state have already run dry. Stores in Kearney, North Platte and Doniphan reported being out of gas for a short time.

I thought it was kind of funny when people were predicting that this refinery outage might cause prices to go up by 1 or 2 cents. Maybe when inventories are full and utilization is high, but not now. And Nebraska is going to be lower on the priority list for gasoline coming out of Kansas.