Hurricane Ike’s Supply Chain Disruption Begins to be Quantified

In a previous post, I provided a warning about the supply chain disruption impacts of Hurricane Ike that struck the U.S. Gulf coast.  While the overall destruction was not as bad as could conceivably happen, the cumulative impacts to energy-related supply chains are still occurring as I pen this posting, and caution is still advised as to damage to the overall infrastructure.

Articles in the Financial Times indicate the overall extent of the disruption.  As much as 20 percent of U.S. oil and gas production, as well as refining capacity was lost for over two weeks, and the industry continues to struggle to maintain normal supply. Both Hurricane Gustav and Ike collectively destroyed 52 offshore oil platforms, and severely damaged 33 others.  Four drilling rigs were also destroyed, and one was also severely damaged, along with six gas transmission pipeline systems. Six refineries remained off-line, with 27 others now in stages of re-starting or raising output to normal levels. The U.S. government released more than one million barrels of oil from the Strategic Petroleum Reserve to ease shortages, but still must be refined and distributed.

Oil refiners and distributors faced with a difficult demand and supply imbalance, were forced to divert fuel from other markets to ensure adequate supply to the emergency areas.  As a result, gasoline filling stations throughout the Southeastern U.S. are now experiencing shortages, with long lines and frustrated consumers seeking ways to fuel their vehicles. With prolonged power shortages, residents and businesses in the greater Houston and Galveston areas scrambled to purchase backup generators. Gasoline prices in the Houston Texas area hit $5 per gallon earlier this week, but gasoline prices for the remainder of the U.S. have only spiked marginally thus far.

The planning for supply chain disruptions often involves understanding of the various scenarios that can occur as a result of the specific disruption.  Supply chain planners often need the ability to simulate and analyze potential scenarios, as well as have the tools and visibility needed to quickly respond to demand and supply imbalances within markets or regions.

Readers of Supply Chain Matters from the Southeast U.S. will no doubt be able to relate to the effects of this problem.

 Bob Ferrari

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