Posted on 03/16/2006 11:07:59 PM PST by M. Espinola
Edited on 03/16/2006 11:14:20 PM PST by Sidebar Moderator. [history]
[snip]It isn't an anniversary to celebrate, but Chicago passed the one-year mark of gasoline above $2 per gallon. And, thanks in part to our federal government, another year at this level is a real possibility.
According to the Department of Energy, Feb. 28, 2005 was the last time gasoline averaged $1.99 per gallon in Chicago. By early March, it hit $2 and has stayed well above that level since.
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Chicagoans have dealt with shorter stretches of $2 gas before. Indeed, Chicago was the first American city to reach that milestone back in May 2000. But a few fill-ups at this wallet-emptying level is one thing, a year's worth is quite another.
Of course, the main culprit is the high price of oil. After staying comfortably below $20 per barrel throughout most the 1990s, the cost of crude ballooned to $56 in 2005, and currently sits at $62.17. Each dollar-per-barrel rise translates into roughly 2.5 cents more per gallon. Strong global demand is the primary cause of the increase.
But oil prices aren't the only reason. Federal regulations also have played a big part. This includes complicated fuel requirements that have led to a variety of costly, specialized gasoline blends, dubbed "boutique fuels."
In addition, the EPA has created a maze of red tape that makes it difficult for refiners to expand capacity to meet growing demand. These regulations have disproportionately hurt the Chicago market, which has both tough fuel requirements and tight refining capacity.
The $2 era for gasoline
How much longer will the $2-and-above era last?
It's hard to say, given the difficulties in predicting the future price of oil. Petro-pessimists warn that the amount of oil still untapped is limited, and point to the continued political turmoil in many major oil-producing nations. Optimists see a flood of new investment in global production that should come online in the years ahead, and hope that the federal government will lift restrictions on domestic oil production in Alaska and offshore.
While future oil prices might rise or fall, the federal regulatory burden is going nowhere but up.
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Last year's energy bill was supposed to provide gas price relief, but it's having the opposite effect. For example, the new law's requirement that ethanol be added to gasoline has already boosted prices since it took effect Jan. 1. Since then, ethanol has ranged from 50 cents to $1 per gallon more than gasoline. The ethanol requirement might be good news for the Midwest corn farmers and big ethanol producers such as Decatur-based Archer Daniels Midland that lobbied for it, but it has added several cents to the pump price. The mandate, currently at 4 billion gallons for 2006, nearly doubles, to 7.5 billion gallons, in 2012.
The Environmental Protection Agency also is phasing in costly new limits on the sulfur content of gasoline and diesel fuel, and it recently proposed another rule designed to reduce benzene and other components from gasoline.
Many of these provisions, including the new ethanol mandate, are particularly costly during the summer months when the more stringent summer-grade fuel requirements take effect.
For this reason, the price of gasoline often rises in late spring, as the fuels system begins the difficult transition to these summer blends. Thus, the price this March/April might be the cheapest Chicagoans will see until fall.
Even beyond this year, the cumulative cost of so many gasoline requirements is likely to continue growing.
Regulatory inertia
Efforts to streamline or eliminate some of these regulations have been unsuccessful. Even relatively modest changes have been derided as environmental rollbacks. In truth, there is ample room to reduce the economic burden of these gasoline rules without sacrificing environmental protection, but attempts by some in Congress to do so have all failed.
Although 12 months of $2 gasoline has made this a high-priority political issue, Washington remains part of the problem. Right now, the federal government is doing nothing to reduce the likelihood that March 2007 will mark the two-year anniversary of $2 gas.
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CA adds sales tax to gas. Gas has doubled over the last few years and so has CA's tax take. Talk about a windfall. They're making over $0.20 per gallon just in sales (not road) taxes. That's more than the evil oil companies make of a gallon of gas.
Meanwhile gasoline surplus is at a 7 year high! This makes no sense! Gas in Texas is at $2.50.
Here is a detailed breakdown of state taxes.
The way I look at it, fill up today for tomorrow the price will probably be higher.
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$2.50 a gallon in Republik of Asheville, NC. Skip Asheville on your touring this year! Of course those poor oil companies have had a rough quarter of profits this time.
It's getting a head start in my neck of the woods. We have gone from @2.15 to $2.55 per gallon for regular unleaded in the past 3 weeks.
Yup. Montgomery, Alabama went from (cheapest station I use) 1.97 3 weeks ago to 2.43 as of yesterday afternoon.
IMHO, this has a lot more bearing on the elections in November than the Ports deal. The Republican congress, if it wants to stay in power, really ought to look into doing something... Fed gas tax relief for instance.
Poor oil companies make ~10% profit, what a windfall!
As a good free market conservative I cringe at the thought of government intervention, but these companies are just begging for vote minded legislators to step in.
~10% profit...trying my best to educate...
Thank you, thank you, THANK YOU Congresscritters seeking vote-buying tax dollars and enviro-nazis wanting to throw the US back to the days when we all walked or used wagons to carry our goods!!! THOSE are going to be some GREAT days in America's future and I am SO looking forward to them getting here (horses won't be allowed by the enviro-nazis - pollution from horse poop, y'know)!!!!
Oh, golly gee whillickers!! I can HARDLY wait until those days are HERE!!!!!
(/extreme sarc)
Energy companies (oil) average 7% rate of return on their investment (profit). Energy companies also have to spend billions of dollars years before hydrocarbon production starts and the cash register starts ticking. Monetary numbers are extremely high when the world is producing 80 million barrels of oil per day.
Banking firms make an average of 37% profit, major networks make 35% average profit and dry goods stores make an average of 28% profit. I don't see anyone complaining about their credit card bills and the banking firm profits.
Federal government also get 38 cents per gallon of gasoline sold. EPA and environmental groups are also driving cost of fuel up. Diesel is scheduled to be sulfur free within three years. Cost of refining is extremely high to remove all sulfur from diesel fuel. There are also 48 different required gasoline blends for various parts of the country.
Car fuel is still very cheap compare to 1970 dollars. I also don't hear anyone complaining about the cost of "Evian" bottled water that costs approximately $300 per barrel or coke that is approximately $315 per barrel.
2.50 in Silver Spring, MD also.
what's wrong with asheville? Other than the slacker youth hanging around on the streets, have things gone down hill?
I'd prefer that the government legislate how they spent their profit (ie: build more refineries) before taxing the profit away.
Or have the government threaten to build refineries and then order the oil companies to pay for it. I'd think that the threat of our government building a refinery (along with all the governmental cost overruns and general inefficiencies) would light a fire under the behind of many an oil company...
Car fuel is still very cheap compare to 1970 dollars. I also don't hear anyone complaining about the cost of "Evian" bottled water that costs approximately $300 per barrel or coke that is approximately $315 per barrel.
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I can easily live without Evian or Coke without it affecting my life in any way.
Can you say the same about gasoline? That you can live without gasoline and not have it affect your life in any way?
Makes perfect sense. Our high demand for gasoline has allowed government, oil producing nations, and oil companies to make a killing off of us. It's not a free market, so they can keep the price high regardless of supply. And if supply dips even slightly, they can jack the price to the ceiling.
I always love when folks bring up the bottle water canard.
If every working human in the USA consumed 2-5 gallons of bottled water per day, you'd pay what commercial water users pay for it. Add in a bottle/container + hefty retail profit and you would be able to buy a gallon for a quarter or so.
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