Friday, November 2, 2012

Hurricane Hits Just-In-Time Economy

I've been wondering for a long time whether the just-in-time nature of modern economies created large-scale rapid failure modes in which a shock that pushed the system sufficiently far out of its envelope of resilience would trigger a catastrophic breakdown.  I've called this kind of thing a "death-star vulnerability" in which if something hit civilization in just the right way in the most vulnerable place, the whole thing might blow.  I first became interested in this in the context of cyber-attacks,  but I've never seen any way to get any kind of intellectually defensible handle on the problem of understanding the existence, nature, and tractability of that kind of vulnerability.

At any rate, and at some risk of sounding ghoulishly detached, Hurricane Sandy is creating a pretty interesting natural experiment that is illuminating some of the issues.  The hurricane hit land on Monday evening, and by Thursday the entire region is close to out of gas:
The lines of cars waiting for gas at a Sunoco here ran in three directions: a mile-long line up the Garden State Parkway, a half-mile line along Vauxhall Road, and another, including a fleet of mail trucks that needed to refuel before resuming their rounds, snaking through a back entrance. The scene was being replayed across the state as drivers waited in lines that ran hundreds of vehicles deep, requiring state troopers and local police to protect against exploding tempers.

 “I’ve been pumping gas for 36 hours, I pumped 17,000 gallons,” said Abhishek Soni, the owner of an Exxon in Montclair, where disputes on the line Wednesday night had become so heated that Mr. Soni called the police and turned off the pumps for 45 minutes to restore calm. “My nose, my mouth is bleeding from the fumes. The fighting just makes it worse.”

Four days after Hurricane Sandy, the effort to secure enough gas for the region moved to the forefront of recovery work. The problems affected even New York City, where the Taxi Commission warned that the suddenly indispensable fleet of yellow cabs would thin significantly Friday because of the fuel shortage.
It sounds like this is a non-trivial threat to social order if it goes on a lot longer.  And it illustrates that despite a fairly focussed and competent-seeming response by authorities at all levels, the interlocking nature of infrastructures, and the lack of much inventory in the system, mean that it's quite hard to recover if enough infrastructure is damaged at the same time.  And, as in the case of the 2000 UK petrol strike, people get really ugly, really fast once their access to food and fuel is threatened.

In this case, it seems that the issues are a combination of refinery outages and gas stations without power:
The ports and refineries that supply much of the region’s gas had been shut down in advance of the storm and were damaged by it. That disrupted deliveries to gas stations that had power to pump the fuel. But the bigger problem was that many stations and storage facilities remained without power.
The picture this conjures is of large amounts of gasoline sitting underground unusable because the fuel station above lacks power.  This suggests scope for legal requirements to improve resilience.  If fuel stations were required to have generators, they'd always have power.  If they were required to hold a larger minimum fuel stock, they would last longer before running out in a crisis.  Neither measure is in the interests of an individual station owner unless his or her competitors are also required to do it.  Both would tremendously increase the resiliency of the overall system.  Repairs to all other infrastructures (power, subways, phones, etc) require people running around in trucks fixing things and those trucks running short of fuel will have a very deleterious effect on the speed of recovery of the region's economy.

It also raises some interesting questions about what would happen if New York was rendered largely unable to operate for an extended period.  I would guess that New York is the most critical city in the global economy due its role in the global financial system.  I would guess things would go pretty seriously awry if New York ever couldn't function for weeks.


Mr. Sunshine said...

FEMA has spent tens of millions of its unclassified budget (95% or so classified, since it dealt with Continuity Of Government planning, a few years ago when I was familiar with it) to provide backup power facilities for designated "PEP" or "Primary Entry Point" AM radio broadcast facilities nationwide. I'd guess many government facilities also have access to fuel in the NYC area.

Disaster planning generally assumes that most people will not be out and about following the incident, but home, listening to their AM radio, leaving the streets open to "official business". If the people become restless, the plan in place is not to provide fuel, but National Guard troops to maintain "order".

Seth said...

I had the impression that a large amount of the financial trading infrastructure had already migrated outside Manhattan because of cost and disaster recovery considerations, while the MotU deal-making banker types still cling to the prestige addresses.

The fact that the NYSE had to close for two days suggests my impression of Wall St "tech emigration" was an overestimate. Nevertheless, it's interesting to think of NYC being "shut down" as a natural experiment in how dependent the real economy is on the specific functions of NYC finance. If the wheeler-dealers were incommunicado while electronic trading proceeded apace, would anyone notice?

Of course, the most urgent question is the fragility of our JIT approach to even food and energy. I sure hope the whole region affected by "Sandy" are able to recover quickly. Maybe their experience will give us all some insight into how to be more adaptable in future natural disruptions.

Michael R said...

Seems to me the headline should rather be, "Hurricane Hits Optimistically Engineered Infrastructure and Processes".

Or maybe, "Society Fails to take Infrastructure Seriously, Pays Consequences".

Just imagine how much worse the situation would be now, today, if not for corrective action prompted by the derecho and Hurricane Irene last year.

With sufficiently frequent wake-up calls, the basic structure of the current system seems up to the task.

Aaron said...

Although JIT inventories don't provide for resilience, I think the threshold vulnerabilities of complex interdependent networks is probably more relevant. What is fascinating about cascading failures is that in the early onset the system appears incredibly resilient. Functioning nodes take up the load from failed ones and the network continues - until a certain (and usually difficult to predict) threshold is reached and then spectacular and sudden failure occurs.

Networks are resilient by nature - but that same resilience also builds in a unique property of sudden and often unpredictable failure.

Allan said...

4$ per gallon of petroleum is bad for me at least. With such lines at gas stations, I freak out. I go at nights, when there is a higher chance of getting your car filled :)


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