NORFOLK, Va. -- For Miller Oil Co. Inc., April 14 was most definitely not a good Friday. It was on that holiday weekend that the Norfolk, Va.-based marketer's main supply sourcea nearby Kinder Morgan terminal for BP and ExxonMobil supplyshut down to convert its inventory from using methyl tertiary butyl ether (MTBE) to ethanol. Events progressed fairly smoothly, and the terminal was due to reopen on Easter Sundayuntil the terminal's vapor burner exploded. The terminal shut down again for the next three days.
That was a main terminal for us, out of commission [image-nocss] for five days, Jeff Miller, president of Miller Oil, told CSP Daily News. Miller operates more than 50 convenience stores in southeastern Virginia and a large dealer network.
For backup supply, Miller Oil had to send its trucks to a terminal in Richmond, Va., about a 90-mile drive away and not a perfect alternative. Your efficiencies are built around supplying a fairly close geographic area, he explained. The efficiency was cut in half. Some [terminals] were doing the conversion up in Richmond at the same time, which created problems because they were down, so we had other product outages. We had a lot of logistical problems, just terrible issues in terms of not being able to get enough product fast enough.
At first, Miller Oil tried to cope with the shortage by focusing only on delivering regular grade and dropping off split loads at its stations so all would have at least some fuel to sell. This worked for the first day or two, but then media coverage of the supply shortage kicked into gear.
When everyone in our market decides to go top off because they're afraid there's not going to be enough [gasoline], they double the consumption under an already strained system, Miller said. So you drop 2,000 to 3,000 gallons in a regular tank and it's gone in an hour. Soon as that one runs out, then everyone goes over to the next station, and that one runs out.
On its worst day, 19 of Miller Oil's stores had no gasoline to sell. Miller estimated that almost every gas station in his area at any given point in time did not have all three products the last two weeks in April. For a two-week period, I don't think anyone slept, he recalled. I think the only people sleeping were the truck drivers who were sitting in lines for two to three hours waiting to pick up a load of gasoline.
With this experience under his belt, Miller is not optimistic about the supply situation for the rest of 2006. It seems as though there's an unwillingness or inability for the big oil companies to get their inventories right and to have a consistent and stable supply scenario, he said. Then you throw the ethanol on top of that.
He noted that although Miller Oil's market area has not yet had an issue with ethanol supply, it is vulnerable to outages because all of the corn-based additive is delivered to Virginia by rail car and barge. So if there's a hiccup in the ethanol supply, we can find ourselves with lots of gas and no ethanol, and not being able to buy the gas.
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