Gas Prices

[Taxman]

AAA Daily Fuel Gauge Report (http://198.6.95.31/sbsavg.asp)

Since I know a lot of posters here live in California or Nevada, I thought I'd post this little gem showing how much we're getting screwed. As of today the national average per gallon for regular gasoline is $1.71. In California, we're all paying $2.18, $0.47 more (or even more than this if you live in San Diego like me). In Nevada, you're paying $2.06, $0.35 more than the national average. I would love to see some sources explaining this discrepency, because all I can think of is that we're getting taken to the cleaners due to the high demand for gas in this part of the country (California at least) and possibly because of a manipulation of the exact effect problems in the Middle East have on domestic oil prices. Sometimes the consumer doesn't always get what he wants.

[adios]

Having said that, gasoline prices in California are generally higher than the rest of the country for three main reasons: California’s gas taxes are far higher than the national average; our gasoline is cleaner-burning, which protects our air quality but makes it more expensive to produce; and, government regulations constrain increasing gasoline supplies because it is difficult and expensive to expand refineries or build new ones, or to upgrade import facilities and other petroleum infrastructure.

Cutting gasoline taxes and repealing cleaner-burning gasoline rules aren’t viable options. The best option that remains to reduce market upsets is to increase gasoline supplies.

The logical steps are to streamline the state’s cumbersome permit system by getting rid of overlapping and duplicative rules while still protecting the environment, and to avoid arbitrary policy mandates such as the 15% goal of reducing gasoline demand which discourages investments that could add to California’s future gasoline supplies.

The last problem points to probable over regulation by government. Be careful what you ask for. HeeHaw.

Sometimes Real Life is Stranger Than Fiction – Especially in California Government (http://www.caltax.org/member/digest/Fall2003/9.2003.Krause-SometimeLifeIsStrangerThanFiction.07.htm)

Sometimes Real Life is Stranger Than Fiction – Especially in California Government
By Audrie Krause


Audrie Krause represents STOP Hidden Gas Taxes, a consumer, business and taxpayer coalition. Cal-Tax is a member of the coalition.
In 1999, the Legislature directed the California Energy Commission (CEC) to develop a plan to stabilize the state’s volatile gasoline prices. A really simple approach would have been to figure out as many cost-effective ways as possible to add to the supplies of environmentally sound transportation fuels – existing clean ones and new, to-be-developed, renewable ones – and then let the market select the winners.

So what did they come up with? After spending millions of tax dollars analyzing this very complex problem with the state’s Air Resources Board (ARB), the commission and the ARB decided that the best way to reduce gasoline prices is to mandate an arbitrary reduction in demand. Their goal is wrapped in a proposal that includes increasing vehicle fuel efficiency and substituting non-petroleum renewable fuels for existing, clean-burning gasoline. Worthy goals, but to actually achieve those goals they may have to set the state’s consumers on a collision course with billions of dollars in higher gasoline taxes and increased vehicle license fees.

You can read about all this for yourself in the Energy Commission’s reports on Reducing Petroleum Dependence and again in its recently adopted final Integrated Energy Policy Report. But, since there are thousands of pages to review, here’s a brief summary of the facts.

The CEC staffers who wrote these reports attempted to bury the possible fuel tax increase options beneath optimistic rhetoric that their goal of reducing gasoline demand by 15% from 2003 levels, by 2020 could be achieved by increasing federal vehicle efficiency standards (CAFÉ).

Again, a worthy goal, but the fact is the state has no authority to change CAFÉ standards – only the federal government can do that.

So that brings us back to what many believe was the Energy Commission’s and Air Resources Board’s intent all along: to reduce the availability and use of cleaner-burning gasoline in favor of as yet unproven technologies and fuels of their choosing. But what will they do if the efficiency and substitution approaches don’t work?

Although they state they would go back to the drawing board, the only other choice they have if the substitution approaches don’t work is to increase gasoline taxes and vehicle fees to limit the use of the existing fuel supply. To find out how much they might increase these taxes and fees, we can look at the commission’s “Task Three Report on Reducing Petroleum Dependency.”

In the section of the report entitled “Fuel Pricing Options,” you will find these specifically proposed taxes and fees that might give you financial reasons to stay out of your vehicle:

Increase gasoline and diesel taxes by 50 cents per gallon. This means an annual increase of $7.3 billion in fuel taxes and the loss of 80,000 jobs, according to a study by an independent state finance expert.

Pay-at-the-pump auto insurance at a cost of 43 cents per gallon. This idea would cost drivers more than $6 billion a year and 34,000 Californians would lose their jobs.

A new Vehicle Miles Traveled Tax of 2 cents for every mile you drive. The price tag for this scheme is about $6 billion a year and another 65,000 lost jobs.

Higher taxes on minivans, SUVs and pickups of $3,500 per vehicle. It all adds up to possible fuel tax increases of more than $19 billion per year, nearly $200 billion over a 10-year period. Because of the drain on the economy these tax increases would create, more than 179,000 people could lose their jobs.

And remember, the CEC’s mission was to stabilize gasoline prices.

So what would be a feasible strategy to achieve the goal of protecting gasoline consumers from market volatility? A clear-headed analysis of why gasoline prices are volatile would be a start.

But first a little perspective – lots of folks gripe about gasoline prices. The fact is, fuel prices do fluctuate. But, over the last 20 years, based on Bureau of Labor Statistics data, gasoline prices have risen far less than most other products and services we use in our daily lives, including food, clothing, housing, insurance, utility costs, rent and medical care… to name a few.

Having said that, gasoline prices in California are generally higher than the rest of the country for three main reasons: California’s gas taxes are far higher than the national average; our gasoline is cleaner-burning, which protects our air quality but makes it more expensive to produce; and, government regulations constrain increasing gasoline supplies because it is difficult and expensive to expand refineries or build new ones, or to upgrade import facilities and other petroleum infrastructure.

Cutting gasoline taxes and repealing cleaner-burning gasoline rules aren’t viable options. The best option that remains to reduce market upsets is to increase gasoline supplies.

The logical steps are to streamline the state’s cumbersome permit system by getting rid of overlapping and duplicative rules while still protecting the environment, and to avoid arbitrary policy mandates such as the 15% goal of reducing gasoline demand which discourages investments that could add to California’s future gasoline supplies.

So next time you’re at the gas pump, think about the higher fuel taxes that may be in your future, and contact your elected representative to make sure he or she knows your answer is “NO!”

[M2d]

I think, here in the bay area, it has to do with shipping costs. Yeah, that's it. All of our refineries are located in the east bay, see, so the costs for shipping to SF have to include bridge tolls for the GGB, Bay Bridge, etc. Plus, you know, gas prices being what they are... /images/graemlins/cool.gif

[Kurn, son of Mogh]

sources explaining this discrepency

No mystery. The difference in gas prices from State to State reflect different tax rates. Even in the States where gas is cheapest, 2/3 of what you pay is tax.

[Taxman]

I know full well that there are various extra taxes on gasoline depending on where in the country you are and if that is the only and true explanation then I will accept it. Nevertheless it is a curious coincidence that some of the more affluent states are more consistently bombarded by higher prices. Does this mean that part of the state's success stems from such taxes (or that they succeed in spite of them)? Over 40 cents per gallon seems like a mighty large discrepency to me. I Would be interested in seeing some numbers showing how all 47 cents I pay over the national average are a result of over regulation by the local government (national government is a different story of course). I'm no economic expert, but supply and demand models can work both ways. If the demand gets high enough and the supply is low enough (or made to seem low enough) the prices will rise.

Before someone comes up with some inane blather about this I'll provide a case in point: video games. When first released gaming systems all ae quite expensive. They are also generally released in relatively limited amounts so that the rabid consumers would snap them up immediately at those same high prices. Eventually as the demand falters, the prices are dropped to enocourage another round of good sales. Obviously people were willing at first to pay the higher price because it's something they wanted/needed bad enough and as those who most wanted it were satisfied, the less interested were attracted by the lower prices. This does not mean however that people would not have preferred to pay less in the first place.

California has more cars than any other state and likely more commuters, thus it has many more people needing gas more often and more pressingly that they would pay higher prices. This may or may not have actually influenced the price discrepencies I've noted, but it seems likely to me. Why else would it cost me up to $2.40 per gallon to buy gas in the central valley (CA) along the well traveled I-5? Again, I suppose maybe local taxes could be even higher there, but that seems like a reach to me. Regardless, if all we need to do is increase the gas supply to California, then that sounds fine to me. Of course ultimately I'll happily drive around in my hybrid car as soon as I can afford to buy one.

Feel free to prove me wrong. As always, this is just my opinion.

HawHee

[Taxman]

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The last problem points to probable over regulation by government. Be careful what you ask for. HeeHaw.

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Because all strong regulation by the government would have the exact same effect regardless of the context? Brilliant. HawHee.

[adios]

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Before someone comes up with some inane blather about this

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If the demand gets high enough and the supply is low enough (or made to seem low enough) the prices will rise.

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Obviously people were willing at first to pay the higher price because it's something they wanted/needed bad enough and as those who most wanted it were satisfied, the less interested were attracted by the lower prices.

[/ QUOTE ]


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This does not mean however that people would not have preferred to pay less in the first place.

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California has more cars than any other state and likely more commuters, thus it has many more people needing gas more often and more pressingly that they would pay higher prices. This may or may not have actually influenced the price discrepencies I've noted, but it seems likely to me.

[/ QUOTE ]

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Feel free to prove me wrong. As always, this is just my opinion.

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Fascinating /images/graemlins/smile.gif.

[Taxman]

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Fascinating /images/graemlins/smile.gif

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Enlightening /images/graemlins/smile.gif

[Wake up CALL]

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Nevertheless it is a curious coincidence that some of the more affluent states are more consistently bombarded by higher prices.

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Taxman,

I hate to break this to you and frankly do not know how to do this gently but California is not exactly an affluent state. Hello there, it is in debt up to it's eyeballs. That is why a Republican governor has been elected, in order to help California extricate itself from the spend till the sun don't shine mentality.

Wake

[Taxman]

I stand corrected. What I should have said is states that have many affluent citizens.

[Wake up CALL]

Why are California gasoline prices higher and more
variable than others?

The State of California operates its own reformulated gasoline program with more stringent requirements than Federally-mandated clean gasolines. In addition to the higher cost of cleaner fuel, there is a combined State and local sales and use tax of 7.25 percent on top of an 18.4 cent-per-gallon federal excise tax and an 18.0 cent-per-gallon State excise tax. Refinery margins have also been higher due in large part to price volatility in the region.

California prices are more variable than others because there are relatively few supply sources of its unique blend of gasoline outside the State. California refineries need to be running near their fullest capabilities in order to meet the State's fuel demands. If more than one of its refineries experiences operating difficulties at the same time, California's gasoline supply may become very tight and the prices soar. Supplies could be obtained from some Gulf Coast and foreign refineries; however, California's substantial distance from those refineries is such that any unusual increase in demand or reduction in supply results in a large price response in the market before relief supplies can be delivered. The farther away the necessary relief supplies are, the higher and longer the price spike will be.

California was one of the first states to ban the gasoline additive methyl tertiary butyl ether (MTBE) after it was detected in ground water. Ethanol, a non-petroleum product usually made from corn, is being used in place of MTBE. Gasoline without MTBE is more expensive to produce and requires refineries to change the way they produce and distribute gasoline. Some supply dislocations and price surges occurred in the summer of 2003 as the State moved away from MTBE. Similar problems have also occurred in past fuel transitions.

Why do gasoline prices differ according to region?

Although price levels vary over time, Energy Information Administration (EIA) data indicate that average retail gasoline prices tend to typically be higher in certain States or regions than in others. Aside from taxes, there are other factors that contribute to regional and even local differences in gasoline prices:
Proximity of supply - Areas farthest from the Gulf Coast (the source of nearly half of the gasoline produced in the U.S. and, thus, a major supplier to the rest of the country), tend to have higher prices. The proximity of refineries to crude oil supplies can even be a factor, as well as shipping costs (pipeline or waterborne) from refinery to market.

Supply disruptions - Any event which slows or stops production of gasoline for a short time, such as planned or unplanned refinery maintenance, can prompt bidding for available supplies. If the transportation system cannot support the flow of surplus supplies from one region to another, prices will remain comparatively high.

Competition in the local market - Competitive differences can be substantial between a locality with only one or a few gasoline suppliers versus one with a large number of competitors in close proximity. Consumers in remote locations may face a trade-off between higher local prices and the inconvenience of driving some distance to a lower-priced alternative.

Environmental programs - Some areas of the country are required to use special gasolines. Environmental programs, aimed at reducing carbon monoxide, smog, and air toxics, include the Federal and/or State-re- quired oxygenated, reformulated, and low-volatility (evaporates more slowly) gasolines. Other environmental programs put restrictions on transportation and storage. The reformulated gasolines required in some urban areas and in California cost at least three cents more per gallon to produce than conventional gasoline served elsewhere, increasing the price paid at the pump.

Seventeen states have passed legislation to restrict the use of the gasoline additive MTBE, but of these, only California, Connecticut, Kentucky, Missouri, and New York relied on the additive to begin with. MTBE removal requires large changes to gasoline production and distribution. California faced temporary supply dislocations and price volatility during the summer of 2003 as MTBE was removed from gasoline in the State. Other states may face similar issues as they make the transition to gasoline without MTBE.

Operating costs - Even stations co-located have different traffic patterns, rents, and sources of supply that influence retail price.

[Taxman]

Thanks, that was informative. The funny thing is that I don't even care that much that I'm paying more for gas, though I did think it was a topic worth exploring. After all they pay the same in Europe per Liter (I think that's it) that we pay per gallon. It's certainly true that there are many different factors contributing to gas prices. I will happily pay for gas that is friendlier to the environment. I'm curious where you got this information.

[ QUOTE ]
Competition in the local market - Competitive differences can be substantial between a locality with only one or a few gasoline suppliers versus one with a large number of competitors in close proximity. Consumers in remote locations may face a trade-off between higher local prices and the inconvenience of driving some distance to a lower-priced alternative.

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Well, that certainly sounds like part of what I was talking about. I saw on the local news the other day a segment about how the prices will probably be even higher during the summer due to the high volume of travelers. Thanks again for the information. Lol, didn't think I'd say that to you any time soon /images/graemlins/grin.gif. Cheers.

Taxman

[Ray Zee]

i love it when i see someone drinking bottled water for two bucks complain about a ten cent hike in a gallon of gas.
california is unique in its gas blend so prices tend to spike with demand. thats the answer. and of course the oil companies take every shot at getting in a higher price when possible anywhere they can.
we pay the cheapest price for gas in the world for a developed country and its going to end. so open up your wallets.

[daryn]

anyone remember the good old days of .83/gallon? /images/graemlins/frown.gif

[Wake up CALL]

[ QUOTE ]
anyone remember the good old days of .83/gallon? /images/graemlins/frown.gif

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Anyone remember the good old days of 19.9 cents/gallon? /images/graemlins/smile.gif

[daryn]

no. (yes! 2000 posts!)

[Ray Zee]

in 1966 i bought a new chevy impala convertable with my pool winnings for 2955 bucks. and gas was 25 cents a gallon. same price as a big ice cream cone. same ratio today. except people have the 25 cents inflated to two bucks. so now is the good old days.

[adios]

You beat me to it partner in making the same point. Just taking a price of $1.80 a gallon today and a compounded inflation rate of 3.5% since 1965 (probably slightly higher than that since 65) the price per gallon in 1965 was $0.40 a gallon. Unfortunately I DO remember that it was about $0.25 a gallon then.

[Wake up CALL]

Ray you and Adios must be pups! /images/graemlins/smile.gif We owned a DX Boron service station around 1963 and during the "gas wars", which occurred pretty often, we went down to 19.9 from 23.9 or 24.9. Yep and a vanilla cone from Dairy Queen was just a quarter.