Y2K could mean gas station lines, shortages

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12/13/99- Updated 01:53 PM ET

Y2K could mean gas station lines, shortages

NEW YORK (Bloomberg) - Americans who already are prepared to pay top dollar for champagne and caviar on New Year's Eve may find themselves forking over additional cash for something much more mundane: Gasoline.

Motorists looking to avoid any year-end shortfalls in fuel supplies will buy about 300 million extra gallons in the days leading up to Jan. 1, 2000, or enough to top off a quarter of the nation's cars and light trucks, the government says.

While few service stations are expected to run out of gasoline, pump prices could rise as much as 10 cents to 20 cents a gallon, at least temporarily, as millions of Americans guard against the possibility that oil company computers haven't been inoculated against years ending in double zeros, analysts said.

''Both the anticipation and the publicity about Y2K will mean that people will want to have a full tank of gas,'' said Bill Krause, chief executive officer and founder of Krause Gentle Corp. in West Des Moines, Iowa, which runs a chain of 300 Kum & Go convenience stores. ''On gasoline, we intend to be full.''

7-Eleven Inc., the world's largest convenience store chain, said it bought extra gasoline for the final week of the year.

''We could have 30 to 50 million customers on New Year's Eve,'' said Margaret Chabris, 7-Eleven's public relations manager. The chain, which sells 1.5 billion gallons of gasoline a year, is stocking an extra 16 million gallons for the pumps outside its 2,200 stores nationwide.

The company has arranged for 20 gasoline tank trucks to be on standby in major markets to ensure that fuel can be delivered from refineries, Chabris said.

Wholesalers, too

Convenience stores aren't the only ones stocking up. Oil companies, such as Conoco Inc., and fuel wholesalers expect rising demand as the year draws to an end.

''We have plans to increase some critical inventories and products in places where we think it will be needed,'' said Carlton Adams, a spokesman for Conoco Inc., the fourth-largest U.S. oil company with about 4,900 stations in 1998.

Even government agencies probably will secure extra supplies for their vehicle fleets in the next two weeks, said Philip Wechter, head trader at R.A.D. Energy Corp. in Purchase, N.Y., a wholesaler with contracts to sell fuel to the New York City fire, transit and sanitation departments.

''By the middle of the month, they're all going to want to be topped up,'' Wechter said. ''They have to be, God forbid, should something happen.''

Most of the time, gas tanks in American automobiles are half full, carrying about 1.2 billion gallons of gasoline, according to the U.S. Energy Department. About one in every four of the nation's 200 million personal vehicles will get its tank filled at the end of the year, increasing demand by almost 300 million gallons, the government said.

Strain on system

With polls showing few people are concerned about any major disruptions from malfunctioning computers on Jan. 1, some service station owners aren't expecting long lines and shortages.

''It's going to be almost fashionable to have filled up your tank'' in preparation for Y2K, said Krause, the founder of the Kum & Go stores. Still, if people decide to fill up their tanks in the last few days of the millennium, it could ''put a strain on the distribution system,'' said Dave Costello, an economist for the DOE's Energy Information Administration.

''Nobody in the department thinks it would be a good idea, en masse, for people to'' fill their tanks, Costello said. ''That's human nature, though.''

While most providers of basic services, such as banks, telephone companies and utilities, say they expect few if any disruptions from Y2K computer malfunctions, talk of potential fuel shortages could compound concerns by consumers.

Gasoline hoarding could become a ''self-fulfilling prophecy,'' 7-11's Chabris said. ''It's as if everyone picks up their phones right after midnight to see if there's a dial tone. If that happens, we could lose the phone lines.''

Higher prices

And if there's a perception of a shortage, consumers probably won't pay much attention to what it costs to fill up, analysts said. That's going to encourage service stations owners to boost the price, though probably just temporarily.

''It's natural for an independent gas station to try make a few bucks wherever he can,'' the DOE's Costello said. ''That's why they're in business.''

Average U.S. retail prices for regular gasoline reached a 3 1/2-year high of $1.273 a gallon as of Dec. 6, and the nation's refinery inventories are close to a two-year low, according to DOE figures.

Prices probably will rise 10 cents to 20 cents for about a week because of the year-end hoarding, and then fall back, said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ''We'll see some good old-fashioned price gouging,'' he said.

Not everyone expects soaring prices, and even if they do go up, they won't be there for long. Demand probably will ease in the new year, with so many full gas tanks and any supply disruptions, if they occur at all, expected to be short lived.

Operators of the nation's 100,000 convenience stores, which sell 70% of all U.S. gasoline, will keep prices in line with normal levels, said Lindsay Hutter, a spokeswoman for the National Association of Convenience Stores. The industry won't trash its reputation to make a buck off a panic.

''Our company's not going to raise prices for one day and make people mad for the other 364 in the year,'' said Kum & Go's Krause. Prices may rise for ''only one week,'' O'Grady said. ''This market could crash in a hurry.''

-- (in@the.news), December 15, 1999

Answers

That is just the tip of the iceberg folks.

I've been getting more and more insider information on the oil situation. Still gathering, sorting, and sifting the ramifications. I will be piecing together a final report soon, in the next few days with my projections, FWIW (which may be nothing). In a nutshell, I still see trouble ahead, but not TEOTWAWKI.

-- R.C. (racambab@mailcity.com), December 15, 1999.


...as millions of Americans guard against the possibility that oil company computers haven't been inoculated against years ending in double zeros, analysts said.

I just love how they use the term 'inoculated'. Makes it sound like all the oil industry has to do is get a quick shot at the doctors office and it'll all be fixed...

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), December 15, 1999.


"Kum & Go" convenience stores? Gawd....

and I thought we had it topped out here in California with "In & Out (b)URGE(rs).

-- (cavscout@fix.net), December 15, 1999.


Can anyone anser these...

I really cannot understand why the oil industry and other analysts cannot see what we can see... any ideas on this?

Do you think they DO know but just want to prevent a panic?

Perplexed, that is my current condition :0)

-- Andy (2000EOD@prodigy.net), December 15, 1999.


Cavscout - you wrote:

Kum & Go" convenience stores? Gawd.... and I thought we had it topped out here in California with "In & Out (b)URGE(rs).

I saw my first "Kum and Go" when driving to Oklahoma recently. It was embarrassing - I had to look away. I couldn't believe the name, or that they hadn't changed it 'by now'. I was just glad I didn't have the kids in the car with me!

(And no, I would *never* fill up at the Kum and Go. Turning in the receipt for expense reimbursement would be just too awkward.)

-- Me (me@me.me), December 15, 1999.



Hehehehe! Couple of those 'Kum and Go's' here where I am...always think of a whorehouse/fill-er up! Wish they'd hire some cute girls THEN they'd have a corner on the market! ~LOL~

-- Satanta (OneTroj@nPlease.com), December 15, 1999.

Andy, very good question.

One possibility is that Big Oil sees this as an op to increase prices and profits. Big Oil has more resources than many countries and no doubt more info on Y2K than most of us on this forum.

I suspect that their gross profit could increase due to higher prices even on sales of less volume. They also have strong lobbies to resist rationing or nationalization, so expect prices to rise.

-- Bill P (porterwn@one.net), December 15, 1999.


If any shortages or lines at stations start to develop, the situation could deteriorate very rapidly, causing almost everyone to try to fill up before supplies run out. If any panic occurs near the end of the year, I believe it will happen first at the gas stations. --

-- Danny (dcox@ix.netcom.com), December 15, 1999.

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