New Yorkers, Welcome to the Third World! (Thanks to Sandy)

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New York Mayor Bloomberg signed an emergency order today to “establish an odd-even license plate system” for gas rationing in an effort to bring order back to the long lines waiting for gas.  This was highly reminiscent to me of my travel in Ecuador in the late 90’s, when mile-long lines would result on the streets of Quito if the tankers weren’t getting paid to offload fuel in the port of Guayaquil.

The shortage of gas in New York appears to be affected principally by two dynamics:

1. A real reduction in the supply of fuel being imported into the region and refined. Of the 57 import terminals in the affected region, 8 were reported as still not operational as of Thursday.  In addition, Sandy reduced refinery productivity by 308,000 barrels per day in New Jersey, temporarily crippling Bayway, New Jersey’s largest refinery and idling a Port Reading refinery as well.
2. The human psychological response akin to a run on the bank.  If you don’t know when you are going to get gasoline again, you might as well get as much as you can, even if you may not need it for a while.

On Thursday, an estimated 28% of New York metro area gas stations were not pumping fuel (or could not be contacted), according to the Energy Information Administration.  While critical, it’s a big improvement from Wednesday’s 38%.

Sandy damaged fuel import terminals in the NY area, which was a critical blow since the port of NY is the most important petroleum hub in the northeastern U.S.  In particular, Hess still has four marine terminals with suspended operations.  It also reported that it does not yet have an estimate as to when its 70,000 barrel per day Port Reading , NJ refinery will come back on line, as full commercial power has not yet been restored.  In addition, Phillips 66 announced Monday that its 238,000 barrel per day Bayway refinery – the area’s second largest plant – would be shut for another two to three weeks.

In a very uncomfortable way, Sandy points out the dangers of our devotion to economic efficiency: when you engineer your economy to cut out waste, you design with lowest costs in mind, and redundancy is eliminated.  You rely on sophisticated systems to provide just-in-time inventory.  You cut your utility budgets to the bone in order to keep electricity bills at a minimum.  You cut costs everywhere, because that’s what people want.  And all of that works just fine until something – a storm, a tsunami, some unanticipated Black Swan throws a monkey wrench into the finely tuned, highly calibrated economy.

One moment all is fine.  The next minute, ATMs don’t work.  Gasoline pumps don’t function.  The lights don’t come on.  And the entire machine breaks down.  Suddenly, the recently arrived immigrants from developing cities like Quito, Lagos, and Kuala Lumpur who are used to making ends meet and surviving as a way of life in cities with broken infrastructures seem to be the ones better able to cope.  And those of us who have lived our whole lives expecting the trains to run on time, money to come out of a machine, and the lights to come on don’t quite know what to do, and we are deeply unnerved by it.

(forbes.com)

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