(6 of 11)
When technical hiccups occur, the whole global system often begins to tremble and twitch. Example: just as U.S. refinery capacity was being strained by the demand for gasoline, Exxon was hit in late March by a freak fire at its Bayway Refinery in Linden, N.J. The accident has knocked out some 160,000 bbl. per day of refining production until at least June. That has kept the company switching around tankers on the high seas, sending them to other refineries in a desperate rush to make sure that every drop of crude is refined in a hurry.
OPEC'S production cutbacks are aggravating the operational headaches. To begin with, not every refinery can process every grade of crude. From high-quality Nigerian oil that contains almost no sulfur at all to the heavy goo that glubs from the ground in Kuwait, petroleum covers a wide range of viscosities and weights. But not all refineries can handle every kind of oil, and as OPEC's squeeze has intensified, supplies of light oil used for gasoline have tightened.
To try to keep ahead of the uncertainties brought on by supply interruptions, Exxon uses a pair of IBM 3033 computers that are constantly updated with details that show, among other things, where the entire Exxon fleet is at any moment, and toward what ports the ships are headed. Sometimes the telex traffic originated by the so-called LOGICS system takes on real drama. Recently, when LOGICS operators learned that an Exxon tanker was due to call at the Colombian port of Buenaventura, where marauders in small boats are common at night, a message was quickly dispatched to the ship's master: "Beware bandits and double watch. Raise accommodation ladder and lay out high-pressure hoses."
People accept and admire the technical expertise of oilmen; it is the business side of the industry that they suspect. They fail to understand why prices keep going up, especially when the announcement of an OPEC production cutback or an increase in the cost of oil that is a month or more away by sea from the U.S. seems almost immediately to send the price of gasoline leaping at the pump.
There are, in fact, convincing reasons, some of them highly technical. Gasoline prices are federally controlled, but ceilings vary from station to station, some right across the street from each other, because their expenses vary. The price control formula permits dealers to offset the cost of gasoline, the rent on their gas stations, the wages of their employees and other overhead expenses, and still earn a profit. For competitive reasons, dealers normally sell at somewhat less than their maximum allowable prices; drivers shop around for the best prices when supplies are ample. But when a small surplus of oil turns into a modest shortage, companies are forced to cut back on gasoline shipments, and that lets retailers raise their prices right up to the federal ceilings.
Coming on top of OPEC's cutbacks, the cartel's price increases have a snowball effect. With supplies tight, retail prices in the U.S. begin edging up to the maximum. Then, when OPEC raises its crude oil charges, the U.S. Government allows the price controlled ceiling itself to creep higher. As the demand for gasoline mounts, the retail price