Gas panic inflamed by Katrina, Web

By JIM TUDOR

Those who participated in Georgia’s “Gas Panic 2005” [last] week probably were inspired by at least one of the four rumors that rolled through the state.

Depending on whether you were in Rome or Athens, gasoline stations were supposed to close at 3 p.m. or 4 p.m. Or the governor intended to ask all gas stations to close at 5 p.m. for three days. Or when officials went to release product from the Strategic Petroleum Reserve, they found there was no oil there.

Contemplating another run to the corner station today “just to be safe”? Keep in mind that there is gasoline in Atlanta and throughout Georgia, and the much-reported pipeline “problem” will be old news very soon as product begins to make its way toward Georgia storage tanks.

Yes, some stations may be out of product in the short-term, but deliveries are still catching up with the panic buying. And yes, there were some bad retailers who made very poor short-term business decisions. Unfortunately, they diverted attention from the vast majority of retailers who behaved appropriately. There’s a painful lesson awaiting bad actors, and the marketplace will take care of those who played fair with customers.

Of course, if everyone decides to panic again and run out to fill up their car, boat and every can they buy at Home Depot, the chaos will repeat itself.

Like the straw that broke the camel’s back, a lot of causes led to the perfect storm that struck Georgians last week.

It started with media reports of a 10-day supply and no power in the pipeline. While the information behind these lead stories was factual, a jittery public watching the devastation of Katrina unfold on their televisions envisioned only the worst-case scenario and fixated on such words as possible outages and pipeline broken.

Add to the mix a market where gasoline retailers are dealing with reduced inventory supplies. Once the run began and stores began running out of gasoline, a self-fulfilling panic situation was created, fueled by the urban legends on the Internet.

The state of emergency now in place can stay in effect for up to 30 days under normal conditions. Retailer gasoline margins, which are a lot narrower than most Georgians would ever expect, are “frozen.” Now all future price increases must be validated by a similar increase in cost.

Wednesday’s actions are reflective of world conditions that go well beyond the local gas pump. With no new production capability being developed (there have been no new refineries built in this country since the 1970s) the system is so overwrought that an event far less catastrophic than Katrina throws the supply system into near chaos.

Refining capacity problems are further multiplied by regulations that require boutique fuels in markets such as Atlanta.

When Atlanta began to see fuel shortages, marketers couldn’t simply import fuel from nearby areas such as Macon because Macon’s fuel had a higher sulfur content and was prohibited in the 46 counties surrounding Atlanta.

Thankfully, the federal Environmental Protection Agency has eased this roadblock until Sept. 15 to help ease the supply problem.

If world gasoline prices continue to rise, policy-makers need to also re-examine Georgia’s motor fuel tax system. With gasoline retails at the $3 per gallon, level, Georgia’s total taxes on motor fuel are now among the highest in the Southeast, moving up seven places since June.

That’s because much has been made about Georgia’s low excise tax on motor fuel, but little is said about Georgia being one of the few states in the nation and the only in the Southeast to charge state and local taxes on the retail price of motor fuel.

As world conditions drive retail prices higher, Georgia automatically receives a tax windfall from the higher retails, in effect an increase in our motor fuel taxes. This windfall exceeded $100 million in fiscal 2005. This means that while other states are looking at providing gas tax relief, Georgia continues to benefit from the run-up in prices.

[Editor’s note: The governor late last week suspended collection of taxes on all gasoline sales for a month.]

The events also show the frightening growth and power of the Internet rumor system, which has no gatekeeper to validate the authenticity of data. Consumers gullible enough to make decisions based merely on Internet reports are crying out for more self-inflicted wounds.

I’d like to write more about this problem, but I just got an e-mail that Elvis has been spotted at the Krispy Kreme on Ponce and I don’t want to miss him this time.