CERA: US gasoline prices will slip

May 24, 2000
US gasoline prices are not likely to remain high, even though prices this summer won't be the bargain they were the last two summers, says Cambridge Energy Research Associates. CERA Chairman Daniel Yergin Wednesday briefed a House commerce subcommittee hearing on a CERA study, Gasoline and the American People. '...We don't expect these current price levels to stick,' he said.


WASHINGTON, DC�US gasoline prices are not likely to remain high, even though prices this summer won't be the bargain they were the last two summers, says Cambridge Energy Research Associates.

CERA Chairman Daniel Yergin Wednesday briefed a House commerce subcommittee hearing on a CERA study, Gasoline and the American People. He said rising oil prices, low gasoline stocks, strong summer driving season demand, and environmentally driven gasoline specifications are keeping pressure on pump prices.

"If the 20-year trend of falling real prices for gasoline continues�and we think it will�we don't expect these current price levels to stick. Changes in some of these factors could relieve some of the price pressure we're now seeing."

The CERA study said US driving habits have been changed by relatively low gasoline prices in the last 2 decades. It said Americans are driving 34% more miles than they did 20 years ago, an average of 13,000/year, and they're opting for less fuel-efficient vehicles.

Adjusted for inflation, said CERA, US gasoline prices have dropped from a high of about $2.50/gal in 1980 to $1.16 last year. The cost per mile dropped from 17� to 6�, after adjusting for inflation.

The study said trucks, vans, and sport utility vehicles now account for nearly 4 out of every 10 vehicles on the road. The average new SUV gets about 21 mpg, vs. 27.5 for new cars.

The CERA study showed that steadily rising taxes have increased the price of gasoline over time, although this has been partly offset by greater fuel efficiency, increased refiner competition, and lower refining costs, passed on to the consumer. State, federal, and local taxes average 40� of the retail price of a gallon of US gasoline. The federal excise tax is 18.4�/gal, and state taxes range from 7.5� in Georgia to 32� in Connecticut.

CERA said gasoline is a bargain compared with other consumer products that cost less to make. Gasoline costs about 50% of the price of milk, 40% of the price of bottled water, 14% of the price of fast-food coffee, and 8% of the price of mouthwash.

The study said refiners� margins have shrunk dramatically due to competitive pressures and the higher cost of environmental compliance. Last year, the price spread between the cost of crude and the retail price of gasoline averaged about $15/bbl or 36�/gal, down from almost $25/bbl in 1980 and an inflation-adjusted $75/bbl in the early 1920s.

"In spite of lower profit margins and the continuing large investment made to produce oil products that burn cleaner and are more environmentally friendly, the US refining industry continues to increase its efficiency in order to reduce its overall costs," said CERA Senior Director Kevin Lindemer, a principal author of the study.