To Maintain Your Specialty Oil Supply Security, Prepare for Hurricane Season

The key to specialty oil supply security during a natural disaster is preparation. Learn how we apply lessons learned from Katrina this and every hurricane season. 

This article was originally published at renkertoil.com.

The Threat of Hurricanes to Specialty Oil Supply

Not only was it a major Category 5 hurricane that struck the Gulf coast, Katrina struck so strongly that even as refineries braced for it, the aftermath was hard to recover from. Flooded facilities trying to come back online in its wake faced ruined equipment. Inaccessible infrastructure such as electric service, roads and hydrogen supply further delayed recovery.

For at least two months, customers were left in the lurch as refineries struggled to restart production. Most industries dependent on quality specialty oil - or any oil type, for that matter - for their operations were hurting. 

At the time, Gulf Coast refineries were providing 47 percent of the 17 million barrels per day U.S. refining capacity. Nearly all were shut down.

As ABC News reported:

“On Aug. 30 [2005], the day after the storm made landfall, 95 percent of oil production in the Gulf ceased. Oil companies hurried to restaff the platforms they had evacuated before the storm and make any needed repairs. But 10 months later, yearly oil production was still 30 percent less than pre-Katrina levels.”

The soaring cost of gasoline stole most of the headlines. But there was plenty of pain to go around:

• TPE and EPDM rubber product manufacturing slowed without access to process oil sources.
• Food manufacturers and the industries they rely upon, such as release agent producers, had to stop production or scramble to find new sources of food-grade oil.
• The construction industry, struggling to rebuild electrical infrastructure, faced limited availability of transformer oil.

The list goes on and on. If you were in an oil-dependent industry at the time - which is practically everyone, as oil touches nearly every business category - you felt the supply squeeze in one way or another.

Why Katrina is Still Relevant Today

It might be tempting to be dismissive about Katrina as it was over 15 years ago. The risk may feel remote. But as research shows, global warming has contributed to a steady uptick in both the frequency and severity of tropical storms.

This is especially the case in the southeastern U.S. and in the Caribbean, waterways that are together the gateway to the Gulf. According to recent studies:

“New tropical storm data from 2010 to 2017 showed that ‘the probability of a hurricane having wind speeds of at least 100 knots increased by approximately 15 percent between the early and latter halves of the 39-year record.’”

Will all of these storms form or move into the Gulf? No. But it is worth noting that in 2020 alone, a record-setting year for named storms, the Gulf saw three major hurricanes:

• Laura (Category 4)
• Delta (Category 3)
• Zeta (Category 2)

The two strongest, Laura and Delta, had periods of “rapid intensification,” a 35 mph increase in maximum sustained winds in less than 24 hours. If trends like this continue - more powerful storms that intensify faster - it will become increasingly difficult for refineries to prepare.

This illustrates the looming risk of another Katrina-like event around the bend. A storm that hits too hard and fast for a planned shutdown, and the potential for months of production delays.

But we should also keep in mind that other natural disasters can be nearly as disruptive. The Adhesive and Sealant Council announced on March 15, 2021, a critical shortage of raw materials essential to adhesive manufacturing in the wake of February’s winter storms.

There are important lessons to be learned from these dramatic weather events. 

Supply Security Lessons Learned After Katrina

Prior to Katrina, Renkert Oil had invested in maintaining “hurricane tanks.” These inventory depots provided a backup supply for our regular customers in the case of refinery disruption.

No one could have fully foreseen how bad a hurricane like Katrina would be, compounded by the levee breakage in New Orleans. But with emergency policies in place, we were able to quickly mobilize to help our customers:

• Right away, we recognized Katrina meant longer recovery periods than anyone had planned for and adapted our procedures accordingly.
• Next, we reached out to our contract customers and asked them not to pull more than they needed. What we were really asking was for their trust in us to continue to take care of their most pressing supply needs.
• Over the weeks that followed, we honored our contract terms by supplying our regular customers first and assisted new spot customers reaching out for help by fulfilling their orders as soon as possible.

As a result, Renkert Oil drew down our last drop of oil just as Gulf Coast refineries began delivering their first production to us.  

We learned that hurricane tanks were a good investment. Having this emergency supply on-hand has continued to provide critical risk reduction for our customers. During some supply shortages, we have even been able to help out competitors as well.

Our customers learned that working with a supplier that can provide a bit of “insurance” can make the difference between staying in business and having to shut down. If you want to be properly prepared for natural disasters, the relationship with your supplier is paramount.

How to Protect Your Specialty Oil Supply

What every oil buyer needs to do at the earliest opportunity is to meet with their supplier and either learn about the supply security strategy that is in place or urge them to create one.

Here’s what you can do at your meeting:

Ask your supplier where their products come from.

Do they have more than one source? If the answer is that they use a single refinery in the Gulf region exclusively, be wary. Your next question is even more important.

Ask them about their contingency plans.

Propose a what-if scenario. If they lose a storage facility or access to it, such as in a major flooding event, what’s your alternative? How will they supply you?

Work with your supplier to establish product substitutions.

Ask them for a secondary product recommendation. If they lose access to the highly-refined mineral oils you rely on, what else can they offer you? Is it sourced from a different refinery? Is it stored in a different location?

1. Consider maintaining a back-up supplier

Sharing the business with two distinct producers, either with the same distributor or maintaining two separate supply chains is a risk reduction strategy.

Specialty Oil Consulting and Supply Security from Renkert Oil

Renkert Oil offers a number of supply security solutions to make sure you’re in the best possible position in the event of a natural disaster:

• As described above, hurricane tanks dedicated to maintaining your supply, as our contract customer, throughout an emergency.
• A global network of product sources and storage locations so that if one location is down, we can almost always pull your highly refined mineral oils from another region.
• Decades of logistical expertise combined with dedicated rail cars and close relationships with bulk truck carriers nationwide so that if access corridors are down, we have plenty of alternatives for rerouting.
• Product specialists who will help you identify both your ideal specialty oil and a secondary oil that has a separate supply chain.

Whether due to a natural disaster or other causes, supply disruptions will happen. Be sure you’re working with a proactive supply partner that you can trust to do everything possible to mitigate the risk of a costly shutdown.

Consider making Renkert Oil that trusted partner. Reach out to learn more.