Anorak | Petroplus Goes Bust: What shortage of fuel?

Petroplus Goes Bust: What shortage of fuel?

by | 25th, January 2012

PETROPLUS has gone bust. The media chatter is of fuel shortages. This does rather amuse:

The UK government moved to calm fears of a fuel shortage on forecourts in London and the South East after the Coryton refinery, which supplies 20pc of fuel for the region, stopped sales with immediate effect on Monday afternoon.

Ministers said they were “confident” that motorists would not face disruption to forecourt supplies as petrol retailers found alternative sources of fuel.

Well of course there’s not going to be any shortage of fuel. For two reasons:

1) The refinery is still running. The administrators aren’t going to leave it cold and dead, they’re going to keep running it until a buyer can be found.

2) Why did the refinery go bust? Because there is excess capacity in the system. We have too many refineries, not just in the UK, but in Northern Europe. Thus no one is making any money as there’s lots of competition.

So, why would there be any shortages of petrol? We have too many refineries and the one that’s just gone bust is still producing anyway.

That’s the classical answer: but we have to add one more fact. The storage capacity of the petrol tanks in the nation’s cars is larger than the storage capacity of the nation’s petrol distribution system.

Which means that if everyone rushes to fill up their cars at the same time, we get a shortage of fuel anyway, whatever happens to the refineries. Or, the only thing we have to fear about fuel shortages is a fear of a fuel shortage.

Posted: 25th, January 2012 | In: Money Comments (3) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink