US EXPLANATIONS DIVERGE OVER HIGH GASOLINE PRICES

Bob Tippee

Two explanations of contrasting credibility emerged last month for why, beyond crude oil fundamentals, US gasoline prices are high.

One came from the Government Accountability Office, the other from the Kansas City Star.

GAO examined the boutique fuel trend in the US and concluded that the proliferation of specialty blends has increased gasoline prices and price volatility.

The agency identified 11 special blends—gasoline designed to reduce emissions of ozone precursors and meet oxygen-content specifications. The number jumps to 45 when various octane levels and other factors are considered.

GAO said its evaluation of pretax wholesale price data for 100 cities confirmed the tendency of special blends to increase fuel prices even as they improve air quality.

This comes as no surprise. Raising costs of production and logistics and lowering supply flexibility do raise prices.

But the explanation is useful at a time when most attention focuses on the elevated price of crude oil. Americans need reminders that some of their discomfort results from official policy.

Alas, too many Americans get their information about these subjects from stories like the one that ran on the front page of the June 26 Kansas City Star under this headline: "The Big Squeeze by Big Oil."

According to the long article, oil companies have driven up the price of gasoline by shutting down refineries.

"The US oil industry, wanting to drive up profits, shuttered dozens of refineries over the past quarter century," alleged a secondary headline. "And you feel the pinch at the pump every time you fill up."

The article didn't try to explain why refineries closed or accommodate its central allegation to refining capacity growth of the 1990s. It contained other internal contradictions too numerous to list here.

Oil company executives should read the article, though. It appeared in a serious newspaper because Americans in many places assume the worst about the people who sell them gasoline. In fact, they seem to want to believe the worst.

That should bother oil professionals. It helps explain why they're always grappling with the costly products of political mistakes, such as boutique fuels.

(Online July 8, 2005; author's e-mail: bobt@ogjonline.com)

Related Articles

AMP files FERC request for abandonment of Midla Pipeline

04/03/2014 American Midstream Partners LP (AMP) has filed a request with the US Federal Energy Regulatory Commission to abandon use of its 1920s vintage Midla...

Cheniere, Endesa sign Corpus Christi LNG deal

04/02/2014 Corpus Christi Liquefaction LLC, a subsidiary of Cheniere Energy Inc., has signed an LNG sale and purchase agreement (SPA) with Spanish multination...

Senate Republicans introduce energy amendment to jobs bill

04/02/2014 Three Republican members of the US Senate Energy and Natural Resources Committee introduced legislation that would approve the Keystone XL crude oi...

East Timor not entitled to Bayu-Undan gas pipeline tax, Australia warns

04/01/2014 The Australian government has written to East Timor to warn that the East Timorese are not entitled to tax the natural gas pipeline from the Bayu-U...

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected