Rising
gas expenses caused by environmental,
price regulations
By Larissa Lozano
Online Forty-Niner
Contributing Writer
As gas prices climb and commuting students spend more money filling up their
tanks and more time searching for the best deals, many wonder what exactly is
causing these price increases.
According to the weekly U.S. Retail Gasoline Prices by Formulation, Data and
Analysis from the Energy Information Administration, as of Oct. 10 the price
of a gallon of gasoline was around $2.961 per gallon in Los Angeles County and
$2.964 per gallon in California. In August the Commerce
Department’s trade report showed petroleum prices had jumped 7.3 percent
from the previous year.
The Motor and Equipment Manufacturers Association reported Americans drive more
than 2.5 trillion miles per year in automobiles, light trucks and sport utility
vehicles. The United States alone consumed an average of 20 million barrels of
oil per day in 2004 and 45 percent of motor gasoline in 2004.
Several CSULB students opt to carpool instead of feeling the full impact of a
single-commuter gas bill.
Marysol Ruiz and Robert Rigney, CSULB students, carpool to school even though
their schedules might not coincide.
“
I’d rather wait for her than to have to pay double for gas,” Rigney
said. “It’s a lot more inexpensive.”
Many factors determine what a consumer pays at the pump. According to the Department
of Energy, 13 percent of the cost goes to distribution and marketing costs and
profits. Another 13 percent is given to refining costs and profits, 31 percent
is taxes and 43 percent of the price is the crude oil price. Each station is
also entitled to a markup, which is why many gas station prices sometimes fluctuate
within the same cities and even the same street. The markup consists of a few
cents above the price to make a profit, and there is no set standard for how
much gas stations add onto the price.
“
The pricing depends on the zone,” said Mike Wolf, a 76 Gasoline station
clerk at the station at the intersection of Palo Verde and Sterns. “The
companies set different prices for different locations. For example, Orange County
gets better pricing because of taxes.”
Wolf also said the proximity of a station to freeways and colleges causes higher
prices.
Some states have markup laws prohibiting stations from charging less than a certain
percentage over invoice from the wholesaler. These laws are designed to protect
small, individually owned gas stations from being driven out of business by large
chains who can afford to slash prices at select locations.
“
Demand as a whole is great,” said public relations specialist Jeffrey Spring
of the American Automobile Association in Santa Ana. “California is usually
higher than the rest of the country because of special formulation.”
The special formulation refers to zone pricing which is based on the demographics
of the city.
“
It depends if they can sell gas at a higher price and get away with it,” Spring
said.
Taxes from state to state can affect prices around the country, and competition
among local gas stations can drive prices down. Distance from oil refineries
can also affect prices. Stations by the Gulf of Mexico where oil refineries are
located have lower gas prices due to lower transportation costs.
World events—such as Hurricanes Katrina and Rita—can also raise prices.
According to Spring, 16 percent of gasoline production has gone offline due to
the hurricanes.
Anything that affects any part of the process, from the moment the oil is drilled
through refining and distribution to the moment it is pumped into the vehicle,
will result in a change in price. If a tanker is lost or damaged, or leaks its
oil into ocean, that will put a dent in the oil market.
Environmental standards in the state of California place a high price on oil.
In order to reduce the amount of smog created by burning gasoline, the state
has placed higher clean burning requirements for gasoline that only a few refineries
can specialize in.
The Organization of Petroleum Exporting Countries plays a huge part in the market’s
gasoline prices. OPEC is responsible for 40 percent of the world’s oil
production according to the Energy Information Administration. When OPEC wants
to raise the price of crude oil, it simply reduces production.
In the last four to five years the demand for oil has increased, Spring said.
California currently has no refineries and all the oil has to be shipped into
the state. According to Spring, California purchases around 43 billion gallons
of gasoline in the summer while 45 to 46 million gallons are being consumed.
Demand as a whole is great and the United States is often competing with other
countries in the market. The United States’ main source of oil comes from
countries such as China and Taiwan, Spring said.
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