CIO — The petroleum industry is broken into two halves. Upstream covers refining and distribution. The goal of the downstream half of the oil industry supply chain is to avoid both run-outs and retains. Run-outs are bad. During a run-out, not only is the station not making money, it is turning away customers who will then fill up elsewhere and may never return. Retains?in which a truck is unable to unload a delivery because there isn’t enough room in the station’s tanks and must return, full, to the terminal?are only slightly better. (Because of safety and environmental policies, once a truck begins pumping gas, it has to empty its tank; if it can’t empty its tank, it can’t begin pumping.) Every time a truck visits a filling station, it costs ChevronTexaco about $150. If a visit is wasted, that’s $150 down the drain. With 8,000 Chevron stations in the United States averaging a delivery every 36 hours, retains can add up fast.
Run-outs and retains are not just issues for the retail stations. They figure in at every step of the downstream supply chain, which begins when the raw crude arrives on our shores from wherever it has been pumped out of the ground. For example, a tanker waiting to deliver crude to a refinery can be charged as much as $30,000 a day in docking and unloading fees. Obviously, the more efficiently ChevronTexaco walks the line between run-outs and retains, the more profitable the company becomes.
