Today I was sitting in my office when I overheard someone talking about the exorbitant price of gasoline. They were trying to blame it on California’s emissions standards, specifically on the cost of the additives in our gasoline.
This really chaps my hide. Does anyone care to do the math with me?
So I Googled:
The second result captured my attention. It was a link to some study someone did back in May of 2001…when gas was an overwhelming $1.87 a gallon. You read that right.
It stated that the cost of additives was a mere 5 to 8 CENTS. This was part of an overall cost of 75¢ for refining. This is about 11% of the overall cost if you stay with the top end of the range.
So, I checked to see how the current costs measured up. As of August 20th, Refining Costs and Profits were only 57 CENTS! Almost twenty cents less than 11 years ago, before the wars. So, if we use the same percentage, that’s 6¢ that accounts for the cost of gasoline. Guess what the largest percentage of the total retail price is? That’s right, the cost of crude oil! Imagine that.
Also, California is not the only state to require oxygenates in their gasoline. Take a look at this map from ExxonMobil of all places. I’m tired of people perpetuating this myth that California is an awful state that is trying to gouge its citizens. It looks to me like we are fairly in line with a few other states. Granted, our state is messed up and things do need to be fixed, but don’t fuel the fire that California is the only state that is having problems. Pardon my pun.
Side note: I also noticed this quote from an AP article I saw in the Sacramento Bee:
Sunday’s action was the first time since 2005 – when gas supplies were affected by refinery disruptions in the wake of Hurricane Katrina – that the air board has approved early conversion to winter-gas blends.
Wait a minute. I thought California was a gasoline island unto itself. At least, that’s what I inferred from that Bloomberg article I quoted the other day:
“The Rockies, the Midwest, Gulf Coast, East Coast are all very connected by pipelines,” said Tim Hess, a petroleum analyst for the Energy Information Administration in Washington, D.C. “The West Coast is not connected to that system at all. It’s quite a bit dependent on its own refinery production.”
So, how did Hurricane Katrina affect us? Is it like having an O Negative blood type? You can donate to anyone, but only your type can donate to you? I’m still skeptical that having the “winter blends,” as they call it, will do anything to significantly move the price of gas downward.
It’s basic supply and demand. Consumers are expecting the price of gas to increase, so the demand for gas goes up (because everyone wants to buy it while it is still cheap), and that causes the price of gas goes up. It’s a vicious circle.
I’m OK with basic economics. I’m not OK with people buying into these myths that CA gas is pricey because of taxes or government regulations. Show me the math! 🙂