David N. Nakamura, Refining/Petrochemical Editor
It never fails.
When gasoline prices rise, as they have in the US this year, there is the inevitable backlash from misinformed gasoline consumers. Gasoline prices are increasingly featured in daily newspaper editorial cartoons and nightly newscasts.
The greater volatility is one cause of this increased focus on gasoline prices. Another factor is the availability of price data to the general public. No other commodity has its prices continually advertised on practically every major intersection. If there is any kind of price jump, everyone sees it.
What much of the driving public does not understand is that supply and demand determine the price of gasoline, just like every other consumable good. And a stagnant supply base—due to declining US refinery capacity and decreased imports due to more-stringent specifications—combined with growing demand leads to higher prices.
Currently averaging more than $2/gal in the US, up more than 30% from year-ago levels, gasoline prices are not at inflation-adjusted historically high levels. According to the US Department of Energy's Energy Information Administration, gasoline peaked at $2.99/gal in March 1981, after adjusting for inflation and in 2004 dollars.
Compared with the early 1980s, US gasoline mileage has improved drastically. According to EIA, motor vehicles averaged 17 mpg in 2002, up from 13.6 mpg in 1981. US drivers, however, now drive much more—12,172 miles/vehicle in 2002 vs. 9,477 miles/vehicle in 1981. This increased vehicle use is helping to intensify the impact of higher gasoline prices.
Hybrids
US drivers, in reaction to the higher gasoline prices, are purchasing more hybrid vehicles. The Honda Civic hybrid posted record sales in April, and there is reportedly a 4-month waiting list for the Toyota Prius. And Ford is rolling out the first hybrid sport utility vehicle, the Escape, in August.
Consumer Reports magazine testing, however, revealed that actual mileage performance for hybrid vehicles was lower than US Environmental Protection Agency lab results.
For the Civic hybrid, combined city-highway EPA tests yielded 47.5 mpg, while the Consumer Reports test averaged 36 mpg. The Prius experienced similar results, yielding 55 mpg with EPA testing and 44 mpg with Consumer Reports.
One caveat is that EPA testing is severely outdated. Highway mileage is measured at 47 mph (does anyone drive this slow?) with no wind resistance and without running the air conditioner.
With the additional cost of a hybrid vehicle vs. gasoline-only models running in the thousands of dollars, it would take sustained gasoline prices of $2.50/gal or more to make the additional investment pay out in 5 years or less.
So it appears that the hybrids are a good idea in theory, but more mileage improvements or extremely high fuel prices are needed before they are cost-effective for the average driver.
Boycott?
One example of the aforementioned public's misconceptions was laid out in an e-mail that has been widely circulated this month. For those who understand the industry, the e-mail provided a good laugh; but, unfortunately, many drivers probably believed the e-mail's inaccurate statements.
Basically, the e-mail called for a 1-day boycott (May 19) of gasoline purchases, theorizing that the "oil companies would choke on their stockpiles." The e-mail did not reveal where these stockpiles are located.
American Petroleum Institute statistics show that gasoline inventories as of May 7 were about 194 million bbl, more than 13 million bbl lower than a year ago, and as low as they have ever been entering the summer driving season.
The e-mail purported that the boycott would "hit the entire industry with a net loss of over $4.6 billion." It didn't say what would happen on the day before or after the boycott, which is when boycotting drivers would likely fill their tanks.
It then mentions that the "Arab nations" had promised "reduction and control in prices" 2 weeks ago. Funny, I never realized the Middle East had so much control of US gasoline markets.
If the "boycotts" of the past are any indication, this one will have no effect on prices or consumption.
Interestingly, a recent survey from the American Automobile Association found that 3.4% more US vacationers will travel during the Memorial Day weekend, the traditional start of the summer driving season, compared with 2003.
Even though unwilling to change, some people are always looking for an excuse to complain. It never fails.
