Gasoline gouging is official

Daily Herald ^ | October 14, 2006 | PAUL FOY

[thackney]

A report ordered by Gov. Jon Huntsman blames gas stations, not refineries, for "gouging" motorists with stubbornly high gasoline prices.

"Our report revealed that gas retailers are making a healthy profit off Utah consumers and continue to do so even as rack prices keep dropping," Huntsman's commerce chief, Francine Giani, said Friday. "While these business owners may not be breaking any Utah laws, they are certainly gouging fellow citizens at the pump."

While the gas retailers haven't been found to have violated any Utah laws, that doesn't mean the Governor's Office will stop monitoring gasoline prices in Utah, said Mike Mower, spokesman for Huntsman's office.

"The state's report shows retailers charged higher prices. What hasn't been uncovered is criminal intent or a conspiracy to artificially inflate gasoline prices," he said. "Had there been actual proof of price gouging, then the Attorney General's Office would have gotten involved."

Mower said Huntsman will continue to monitor gas prices over the next few months to determine if Utah's prices align with national prices, or whether further action is needed.

"If Utah's prices don't come in line with national prices within a month, then the Governor's Office will consider other options including regulatory action," Mower said.

Utah gasoline prices averaged $2.57 a gallon for unleaded on Thursday, compared with the national average of $2.25, Giani's report said. That 32-cent disparity has remained constant since Sept. 11, she said. On Friday, gasoline prices averaged $2.52 in the Provo-Orem area, down from $2.92 a month ago, according to AAA Utah.

While Giani blamed retailers, she couldn't get the gas stations or Utah's five refineries to reveal their profit margins for a definitive analysis.

In response to bottom-line questions from Giani, some refineries simply referred her to their corporate Web sites, which didn't reveal any useful information. One refinery didn't respond at all.

Giani quizzed 24 randomly chosen gas station operators, but only four responded, all in rural Utah. They revealed their "rack" prices -- the stated price at bulk fuel terminals -- but Giani said none of the retailers disclosed routine discounts that lower the rack price.

"The retailers are an easy target," said John Hill, executive director of the Utah Petroleum Marketers & Retailers Association, which represents gasoline stations.

In an interview, he took exception to Giani's findings, while acknowledging gas stations have been pocketing more profits than usual.

"Last week I ran the numbers, and they made 15.6 cents (a gallon) in profit, which was a 6 percent profit -- not gouging," Hill said.

For much of the year, Utah gas prices were lower than the national average and retailers made only 6 cents to 8 cents a gallon, a normal profit rate, he said. Hill's group represents 80 gas station operators and distributors who deliver fuel.

The fuel distributors complicated Giani's efforts to determine what part of the supply chain was profiting most from gasoline sales in Utah.

Hill blamed refineries, saying their rack prices have been as much as 40 percent higher than the national average. Lee Peacock, president of the Utah Petroleum Association, which represents major oil companies, didn't immediately return a call Friday from The Associated Press.

Utah has an isolated gasoline market, buffeted from national forces that can lower prices. For the same reason, Utah's gas prices have often been lower than the national average.

But the state's strong economy is keeping gas prices high while prices elsewhere decline, and Giani's report says gasoline consumption in Utah has risen nearly 3 percent a year since 1990. Giani warned that Utah gas prices could creep higher over the long term because Utah's refineries are operating at near capacity and no refinery is planning to expand production.

Also running at capacity are pipelines that bring crude oil from Canada, Wyoming and the Uinta basin to the North Salt Lake City refineries.

Adding to Utah's tight supplies, some of the refineries are exporting gasoline to Idaho and Washington, Giani said.

Mower, citing data from Utahgasprices.com, which tracks some of the lowest gas prices statewide, says gasoline prices in Utah have dropped from a high of around $2.90 on Sept. 15 when the Governor's Office launched its investigation, to around $2.45 on Friday.

Based on that data, Utah's gas prices have fallen but remain 24 cents above the national average, Mower said.

"We've narrowed the price gap by about a third since the investigation began," he said.

[Dan Evans]

...new crude was only being given a purchase price of ~ $30/bbl. The reason given was that there was no additional room in any nearby oil pipelines to transport it.

Yeah, I've heard the the high price of gasoline has little to do with the price of oil in the US because, even we simply don't have the refining capacity. They are refining gasoline in India and shipping it to the US.

All this goes toward limiting the supply and is not entirely the fault of the oil companies. (When gas was over three dollars a gallon, I'll bet a lot of companies wished they had more production facilities).

But a limited supply means higher prices. The only way around that is rationing by ration card or by inconvenience (shortages and gas lines at the pump).

[Lurker]

Watch some Lou Dobbs on CNN, or read some Pat Buchanan.

Or you could just have a punch press installed in your forehead. The result would be the same.

L

[Dan Evans]

Sure, it happens all the time. I'm trying to think of an example, but I can't. Maybe YOU can.

How about when "little guys" Bill Gates, Apple, Dell, Gateway and dozens of other companies took the software and personal computer markets away from IBM and the other biggies that were trying to get into the market.

Since when did I did I propose any of the "Democrat solutions" you accuse me of?

Well I haven't heard any proposals at all from you. You simply claimed that the free market doesn't work in the petroleum business so I still don't know where you're coming from. Why don't you expand on what you think should be done about high gasoline prices?

[TYVets]

My mad, I was agreeing with you 100%.

[Cobra64]

There's no such thing as price gouging in a free market. You choose to pay what you want. You shop prices or you don't drive etc. This article and that Gov is a bunch of BS!

Bingo! There are some folks here on Free Republic that don't understand economics, free enterprise market, and capitalism.

[Cobra64]

Gouging? That's what it's called when the people who actually do the work make a profit that's 1/3 that of the government's take on each sale? Sure, makes sense -- business owner takes the risk, runs the shop, takes responsibility for upkeep and liability and then is painted by the government as dishonest when they dare to take a profit on their efforts. Heaven forbid!

Yup. Let's talk about price gouging. Private sector or the government. See link below:

http://www.taxfoundation.org/publications/show/1139.html

The market sets the selling price with x% profit. The government sets the TAX which is non-negotiable and not subject to economic pressures.

[Paladin2]

Since Europe has had a big shift in cars from gas to Diesel, the refineries there end up making an excess of gasoline in order to supply enough Diesel for the local markets. The excess gas has been sent to the US east coast.

This may explain the East/West price split shown on the gasbuddy.com "gas temperature" map linked above.

[tioga]

I see NY state is on the HIGH side. (sigh)

[Dan Evans]

There are a lot of other factors for high gas prices. Like in New York city the price of pretty much everything is higher. A cup of coffee there costs about twice as much as in Denver -- mostly because there are a lot more wealthy people in New York who are willing to pay for it.

[RockyMtnMan]

> http://gasbuddy.com/gb_gastemperaturemap.aspx

It would be interesting to overlay the data from this report:

http://www.npradc.org/publications/statistics/2003RefiningCapacityReport.pdf

I suspect it would tell a story as well. I haven't got the time but maybe someone who could benefit from this knowledge does.

[tioga]

-take a look at the map in post two......NY is a yellow state in a sea of green.....don't tell me that the fact that dems control most of NY and tax us to death doesn't play a major part in all that. Our gas prices remain high. I live in an upstate rural county and pay through the nose for gas.

[thackney]

Yeah, I've heard the the high price of gasoline has little to do with the price of oil in the US because, even we simply don't have the refining capacity. They are refining gasoline in India and shipping it to the US.

But history shows nothing comes close to oil for effecting the price of gasoline.

We consume about 18.7 MMBPD of petroleum products (not including Natural Gas Liquids).

Crude Oil and Petroleum Products Supplied

Of that 15.2 MMBPD (82%) is crude oil refined here in the US.

Refinery & Blender Net Inputs

But most of the oil comes from foreign nations. We only produce 5.2 MMBPD crude oil domestically. That is 28% of products we consume.

Crude Oil Production

We could nearly triple our domestic oil production before reaching the capacity of our refineries. We do need more refining. But we need to add 30% to our refining and 300% to our domestic oil production.

[thackney]

Since Europe has had a big shift in cars from gas to Diesel, the refineries there end up making an excess of gasoline in order to supply enough Diesel for the local markets. The excess gas has been sent to the US east coast.

We receive distallate (diesel) from most of the same countries in Europe from which we receive gasoline.

U.S. Imports by Country of Origin, Motor Gasoline

U.S. Imports by Country of Origin, Distillate Fuel Oil (Diesel)

[oyez]

How much tax per gallon does Utah's government gouge the customer for?

[thackney]

http://www.freerepublic.com/focus/f-news/1719424/posts?page=12#12

[Dan Evans]

We could nearly triple our domestic oil production before reaching the capacity of our refineries.

Is that true? I was under the impression that, after Katrina, our refineries were pretty much maxed out at about 95 percent of capacity.

[thackney]

They are, but they are refining oil from foreign governments. We could increase domestic oil production and refine US oil instead of sending our dollars to our enemies.

Adding 1 MMPBD of new refining capacity means we import less refined products but would have to import more crude oil.

Adding 1 MMBPD of domestic crude production would remove 1 MMBPD from our imports and keep the dollars here at home.

[Dan Evans]

We could increase domestic oil production and refine US oil instead of sending our dollars to our enemies.

Sounds like a good idea. Just as important is the fact that fluctuations in the price of gas directly affects the popularity of the political party in control of the White House. The Arabs know this and so they can, by reducing oil production, select who becomes president.

I don't like that.

[RightInEastLansing]

Bingo! There are some folks here on Free Republic that don't understand economics, free enterprise market, and capitalism.

The same people that "watch Lou Dobbs and read Buchanan".

[Sofa King]

"Do they write the headline and then just put anything in the actual article? I hate the press."

No. They write the article then just make up a headline that says what they wish the article was about.