Gas Shortages Plague the Southeast

Hurricane-related disruptions in the supply of fuel from Gulf Coast refineries have led stations in Atlanta and elsewhere to run out of gas

Barry Tipping spent three days searching for gas in Atlanta. The quest seemed to be in vain, as the 44-year-old tried nearly 20 gas stations, many with their pumps draped in bags, or waits that stretched to more than an hour. Twice when Tipping did find stations with gas, he sat in a long line only to see the station run out of premium unleaded before he reached the pump. So here was Tipping on Sept. 30 happily paying $4.33 a gallon to fill his silver Mercedes at an Exxon (XOM) station in the northern part of the city, a sense of relief on his face. "I'd pay $5 a gallon if I had to," he said.

Tipping's not alone. The Southeast is experiencing a hurricane-triggered gas shortage that has thrown the region's gas stations into chaos. All but two of the Gulf Coast refineries that were shut down by Hurricanes Ike and Gustav for 10 days are now back up, but the delay in fully refilling the pipelines to the region is forcing many to spend time circling the city in search of stations that have received a fresh shipment of gasoline. And in some instances, tempers have flared: Motorists tell their stories over Atlanta's airwaves, claiming they've seen fistfights and fender benders among drivers jockeying for position before the gas runs out.

In many instances, a new shipment lasts mere hours as motorists converge for the stuff. "Motorists reacted by engaging in some panic buying," says Geoff Sundstrom, a fuel price analyst for the auto club AAA. "They start topping off their gas tank, they come in with a boat or an RV that they don't intend to use, or they're driving up with six fuel cans and trying to fill those."

Power Is the Problem

Refineries along the Gulf of Mexico supply the overwhelming majority of the Southeast's gas, reaching Virginia in the East and as far north as Chicago. A bulk of the Northeast receives oil through barge shipments and the West Coast is supplied mainly from refineries and pipelines in California, so hurricanes tend to spur gasoline shortages in the Southeast, although AAA notes that metro Chicago also saw a bump in gas prices. The dual hurricanes caused widespread power outages on the Gulf Coast, which forced refineries to shut down as the pipelines opened, waiting to transport reserve fuel to the Southeast. "The pipelines were ready to receive product quickly after the hurricanes," says Shirley Neff, president and CEO of the Association of Oil Pipelines, a Washington (D.C.) trade group and lobbyist. "It was a question of having power to deliver product from existing storage either at terminals or refineries."

The nationwide average on Sept. 30 for regular unleaded gasoline was $3.63 per gallon, according to AAA. Cities in the Southeast are well above that mark: The average in Atlanta is $4.03; in Charlotte, N.C., it is $4; and in Nashville, the average has reached $3.87. Gas prices have stayed more stable elsewhere in the country, where a pipeline isn't the sole method of delivery.

Price-gouging has been a concern; in the wake of the storm there were thousands of reports of gas station price-gouging in Georgia, North Carolina, and Florida. North Carolina's Attorney General's office received more than 3,700 complaints regarding price-gouging, and Florida's Attorney General has received more than 2,900 complaints about gas that, in some cases, has been priced as high as $6 a gallon. Florida has been under a state of emergency since August due to tropical storm threats.

Gougers Subject to Fines

Under Florida law, during a state of emergency, any commodities, including food, fuel, and building supplies, cannot be sold at a price deemed "unconscionable" as a way to exploit high demand for such goods. During such times the penalty for station owners found gouging soars to $25,000 per day in fines. "Our investigations will continue and I encourage Floridians to stay vigilant and keep reporting complaints," Florida Attorney General Bill McCollum said on Sept. 13.

Sundstrom says the problem also stems from the high number of independent gas stations and small retail chains in the Southeast, businesses that are not locked into long-term fuel supply contracts. When supplies are ample, independent stations in the South sell gas at some of the lowest prices in the nation. Conversely, when supply runs low, the lack of a consistent supplier forces many of the independently owned stations and small chains to either pay much higher prices for gas or shut down altogether. "You'll see [independently owned] gas stations with bags over their pumps or they'll jack their prices really high and that causes the consumer to panic and overreact," says Sundstrom.

While people like Tipping are willing to pay almost anything, some with longer commutes are starting to feel the financial pinch. Robyn Surloff, who has a 40-mile drive to her office in Atlanta from her home in Cumming, an Atlanta suburb, hasn't been bothered by long waits because she's willing to set the alarm a few minutes earlier in the morning. On Tuesday morning she filled her car with regular unleaded that cost $4.10 per gallon. "I get out early," she says. "But I don't like these prices."

Government and Schools Affected

Motorists aren't the only ones affected. Georgia's State Ethics Committee canceled its monthly meeting because some key members may have been unable to make the trip. Additionally, two North Carolina community colleges shut their doors for several days because faculty and students couldn't find enough fuel to get to school. Asheville Buncombe Technical Community College closed its doors for three days last week because of the shortage, affecting 26,000 students, faculty, and staff. "There were a number of students and employees having trouble making it," says Mona Cornwell, a college spokeswoman. "And we thought it would help reduce the community's demand for fuel."

Cedric Ladhani, who has worked at an Atlanta Chevron (CVX) station since 2004, has had a firsthand glimpse of the past week's gas carnage. Last Friday, Ladhani claims the line for fuel at his station stretched roughly a quarter-mile down the road. In the four days since, Ladhani has had no gas to offer frustrated motorists.

That, in turn, not only decimates his pump sales but harms his convenience store business—the soda, beer, cigarette, and candy trade that represents the main income for most gas stations. "It's definitely been bad," Ladhani says with a shake of his head. "It's as bad as [Hurricane] Katrina." But, like Katrina, the problem will be resolved in time, with relief close for gas station employees like Ladhani and consumers. AAA notes that gas supplies should increase by the end of the week. Ladhani smiles, noting a pending delivery: "The truck comes today."