The United States has been observing Festivus for 18 years now, and this antidote to holiday crassness is vital as ever. As Frank Costanza so aptly described one of its central pillars (in “The Strike,” the episode of “Seinfeld” that originally aired on Dec. 18, 1997):
“The tradition of Festivus begins with the Airing of Grievances. I got a lotta problems with you people! Now you’re gonna hear about ’em!”
Becka Burke was in no hurry. Even though two of her carrot-topped children, ages 2 and 4, scrambled about inside her giant GMC Yukon XL, Burke not only filled up her tank, she stepped back to take a photo of the meter at the pump. Read more
Ever since oil prices, and with them gasoline prices, began plummeting last fall, the trend has been portrayed in varying forms as a “gift” or an “early holiday present” or a “tax rebate” for consumers, who are expected to give thanks for this free stuff.
Even with a surge the past two days, oil prices have been on the downward slide the past 14 months, dropping from about $115 a barrel to around $40. But that hasn’t translated to savings at the pump for all drivers.
In some areas of the United States, gas prices have remained stubbornly flat during the oil plunge, or have inexplicably risen. Fuel Freedom Policy Manager Gal Sitty has put together this informative graph that tracks the price of oil (an amalgam of Brent crude, the international benchmark, and West Texas Intermediate, the U.S. standard) compared with the average price of gasoline in three big states: California, New York and Ohio.
Experts have no shortage of explanations for these anomalies. They usually sound like this: Something-refineries-inaudible. Cue Charlie Brown’s teacher talking wah-wah speak.
It’s true that a unit at the BP refinery in Whiting, Indiana, one of the largest refineries in the Midwest, is back online after breaking down Aug. 8. Media outlets report that gas prices in the region already have begun falling again, but they’re sure not doing so as quickly as they shot up. And it doesn’t explain that gentle slope of a line for New York above.
In California, where gas prices pushed toward $5 in July after a sudden, insufficiently explained shortage, prices remain high, purportedly owing to the Exxon Mobil refinery in Torrance still being below capacity six months after a fire. As Sue Carpenter, automotive writer at the Orange County Register, explains:
Crude oil typically accounts for just 46 percent of the cost of a gallon of gasoline, according to U.S. Energy Information Administration. Taxes account for 16 percent, 13 percent is marketing and distribution, and 25 percent is refining.
In California, though, crude oil is just 34 percent of the cost of a gallon of gas, and refining is 35 percent, according to the California Energy Commission.
Still, it’s curious that just as California motorists were getting hammered, oil refineries weren’t sharing the pain: Refineries in the state collected $1.61 per gallon in July, the highest since the state began keeping records in 1999.
It’s clear that there isn’t enough refinery capacity in the U.S. (Raise your hand if you’d like one built in your back yard. There are people in Whiting who still remember what happened there 70 years and a day ago.) But even if refinery disruptions are partially to blame, it’s only further evidence that we’re too beholden to a volatile global oil market, and we’re dependent on an aging, infrastructure for refining.
The only way to make the fuel pricing structure sustainably affordable is to introduce fuel choice so gasoline has to compete with cheaper, cleaner alternatives like ethanol and methanol.
Until that happens, wild price swings and supply disruptions will be the norm in America.
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- Missouri dad perfectly sums up frustration of volatile gas prices
I used to teach public policy development, while a dean at the University of Colorado. Before that, I was lucky to be involved with colleagues at the U.S. Department of Housing and Urban Development (HUD) and other federal agencies in helping develop public policy. Finally, over the years I have had the good fortune to work with federal, state and local governments as well as nonprofit groups and the private sector in carrying out and evaluating programs to implement policies. And I am only 15! Just prematurely gray.
Looking back and thinking forward with Lewis Carroll’s admonition that “It’s a poor sort of memory that only works backwards,” I have come to the conclusion that few stated public policies come in packaging marked “this policy emanates from careful thinking and reflects a real understanding of cause and effect relationships and impact.” Most public sector policies, particularly those requiring coordination with other policies, are defined in the context of political scientist Charles Lindblom’s science of muddling through.
Many times, government policies appear guided by political intuition and not solid, pre-announcement analysis. When interagency collaboration and coordination concerning policy development is promised, it is often stated with lots of hope but few specific analyses concerning content and impact. When analysis occurs, it, many times, is sporadic and sometimes suggests agency protectionism for their institution’s existing initiatives and sort of a “not in my back yard” department syndrome. For example, poverty programs were and remain conflicted, some focusing on fixing the environment and the physical characteristics of neighborhoods for the folks who live in them, some on thinning out neighborhoods through desegregation, mobility and income support. Linking the spatial and non-spatial policies together has been and is now difficult because of agency rivalry and claims that each agency’s policies and programs have significant value. Close coordination, they say, would rob America of program diversity and key public-interest objectives. Granting policy priority to one agency is difficult. We were and are told by involved agencies that the nation needs different approaches for the same folks or problems, even though resulting multiple programs overlapped, and often generated minimal funding for each program and an “all of the above” approach.
In a similar vein, job, health, housing and welfare policies allocated and still allocate lots of money for new facilities and services, in the belief that negative indices concerning wellness, behavior or illness would diminish significantly and pretty quickly. Among and between agencies, programs were and are now sometimes competitive, and most also appear based on a lack of a firm comprehension of what happens if and when the policy and related programs are implemented. Many observers often were, and some remain, surprised that new services could increase need-based statistics by bringing out people who required services, medical and otherwise. Surprise, low-income and or sick people, once without services, were and are now finding services and trying to secure them. As a result of coming out, they are getting counted for the first time! Absence of careful analysis and relevant data often results in a mismatch between service and household need and policy expectations.
Now, what about energy and transportation fuel policies? The ones in place, and those seemingly desired by different political leaders, reflect the same conflicts, ambiguities and analytical weaknesses. “All of the above” is not a policy. It illustrates the failure of policy-making and the power of different constituencies, of which the most powerful is oil, to weaken the nation’s ability to make effective muddling through choices.
We have subsidized the production of oil and, in effect, its derivative gasoline, when the policy was assumedly to increase drilling and production. Yet we have retained and still retain most of the subsidies, even when we have oil surpluses and many analysts on the right and left indicate the subsidies would not be missed and skew expenditures. We restricted the export of crude oil, when supplies were scarce and security issues were front and center. Perhaps legitimately, we have retained and still retain the barriers to export when the prices are low and reserves among oil companies and the federal government appear relatively high. Maybe this is a legitimate policy because of fears concerning the future security of the U.S. Or maybe it is because of a fear of impending higher gas prices, once the Saudis and OPEC resume historical behavior concerning prices. But from a policy perspective, restrictions on exports are not likely to stand, as pressure builds in Congress to eliminate them.
Some environmental groups, aiming for the perfect and not perfectibility, lessen America’s ability to make strategic choices. Their advocacy of electric and fuel-cell cars, the exclusion of alternative fuels and their critique of natural gas-fired power plants — assuming such advocacy is politically successful — mute the nation’s ability to use alternative fuels as a transitional fuel before electric and fuel-cell cars are ready for prime time and a significant market share. Absent strategic long-term policies integrating alternative fuels with electricity, fuel cells and biofuels, Americans will lose tangible health benefits, environmental improvements, GHG emission reductions, and security options.
Let’s improve the muddle of muddling through. Getting to strategic oil and transportation strategies will involve a good deal of public and interest-group consensus-building, and some willingness to buttress the development with fresh data and analysis — knowing we will never have enough analysis and data to secure absolute wisdom about cause and effect relationships and impact.
We can begin with what we know relatively quickly: The textbooks that students read in high school and college note that America is the land of the free (or almost free) market and the home of risk-taking entrepreneurs. Nope! At least not now with respect to oil and gasoline! Oil companies, behaving like oligopolies, have convinced Congress to turn a deaf ear to policy and legislative options concerning open fuel markets and competition from alternative fuels at the pump. Not good for consumers!
Similarly, the EPA, while indicating that E85 is superior to gasoline concerning most environmental measures, including GHG emissions, has yet to simplify and shorten certification procedures of automobiles for flex-fuel vehicle status. In this context, it has certified only one conversion kit to convert older internal combustion engines to FFV status, resulting in high prices and minimal sales.
EPA has a complex agenda and has initiated many important initiatives to control and reduce GHG emissions and reduce environmental pollution. It has super leadership and bright staff. It’s facing budget constraints and conflicting external and perhaps internal debate over different alternative fuels. Hopefully, it will focus on making the certification processes more efficient, less time-consuming and less costly.
Weaning the nation off of gasoline, as the president has indicated, should be a national goal. It will require, paraphrasing the poet Robert Frost, many miles to go and explicit as well as implicit promises to keep, concerning the science and practice of creating more effective muddling in the creation of national oil and fuel policies. I wish Frost, for the purposes of this column, had used a different word than miles. But such is life, and he remains one of my favorite poets.
William Shakespeare once said that there are “occasions and causes why and wherefore in all things” (Henry V). I would edit the Bard of Avon and add, except when trying to readily understand recent oil price increases in California.
Put two analysts in a room and ask about the cost of oil and you likely will get three or more answers. Many parents send their kids to college to study the hard economic sciences only to find out that their hopes and dreams are often dashed by ideology or weak methodology — sometimes both. Conservative economists argue it’s the fault of unnecessary environmental regulations and taxes. Liberals respond that high prices result from oil speculators and price management by oil companies. Non-ideologues merely respond with, “I don’t know,” and then give a lecture on probable causes, most times, without empirical data related to correlation or causation to back up their statements.
We now have lots of conflicting facts and observations without any real strategic comprehension of what both mean. For example, gasoline prices in California have increased relatively fast and by a large amount, while the cost of oil per barrel has stabilized or even decreased. Daily oil prices per barrel fluctuate, but the variations have been relatively small, and oil costs remain quite low.
The per-gallon price of gasoline in the state has surpassed $5 per gallon in a few stations and is well over $4 per gallon at many other stations. Consumers are dazed, depressed and angered by the severity and quickness of price increases. (Manic depression has likely set in, in light of recent exposure to the previously lower prices at the pump. The New York blackout generated more babies, and the gas crisis of 2015 will probably lead to more visits to psychiatrists.)
Guesstimates of the why and wherefore of price increases reflect more the skills of a carnival barker than that of a skilled economist. Step right up and name your selection of one or more factors leading to the significant and comparatively high gas price increase in California, compared with other states. California has earned the right to claim the title of most expensive regular gas in the nation. Maybe, like in the early ’60s, the Golden State can install an electronic sign celebrating its achievement on the Bay Bridge, in the “left my heart” city of San Francisco, as it did when its population surpassed New York’s. Of course, I am just kidding. It’s not a feat the state is proud about.
Forget the ideologues for a minute! What are respected observers saying about the whys and wherefores of the severe spike in prices in California?
Many journalists writing for newspapers (happily, we still have print!), in and out of California, grant causal status to increases in the state and federal gas taxes, now adding nearly 70 cents to the price of a gallon of gas. Approximately, 10 cents of the total in most stations reflects a new carbon tax on wholesalers.
Others suggest that frequent breakdowns and poor conditions of refineries, as well as recent fires at refineries in California, add up to production and inventory limits. These assertions make some sense, given the marginal room in existing refineries to build more capacity and production.
Some political leaders point to the fact that there are only a relatively small number of refineries in the state. Added to this fact, some say, is the almost oligopolistic control of refineries by two major oil companies. Did you know that Chevron and Tesoro together control nearly 60 percent of California’s refinery capacity? Some oil analysts say the percentage is much, much higher than that — up to 80-90 percent.
Clearly, there is a negative impact on prices generated by a lack of real competition. Significantly, many observers from in and out of the state have warned about the possibility of managed prices in light of the structure of the industry (and its secrecy). In a similar vein, investor speculation on oil has been raised as a variable leading to higher costs at the pump by Sen. Diane Feinstein and others. A few years ago, Sen. Feinstein sought hearings on possible skullduggery. Interestingly, despite assumed inventory shortages, refineries exported nearly 3.5 million gallons a day just before recent major gas-price increases. Gasoline is traded on a global market governed by profits and price disparities — not social welfare.
Coming around third and heading home! Both the costs associated with the state’s requirements to shift from one blend of fuel used in the winter to another in summer, combined with the apparent costs of California’s baseline environmental-blend requirements, are seen by some experts as factors generating higher gas costs and negligible imports from other states.
Blend and seasonal shift mandates normally do increase the costs of gasoline. They probably create extra costs, particularly when the inventory is short, as it is now.
California exports ideas, fashion and lots of other things. But generally, when shortages occur — real or not — the state must import gasoline. It is isolated from refineries in the U.S. and foreign refineries. California must rely on ships, trains and trucks to secure imported oil. No pipelines exist that move gas beyond the boundaries of the state or into the state. No swimmers are strong enough to carry oil on their backs. Pre-spike low prices and blend requirements appear to have muted the incentive to send gasoline to California among would-be exporters.
Surprisingly, there is no consensus-based factor analysis determining the various causes and their relative impact on the upward spike of gas prices. If I had to place a bet on the major causes, I would bet on the likelihood of managed prices and investor speculation, current limited statewide refining and pipeline capacity, and absence of storage capacity.
Are there antidotes to California’s problems? Maybe, but not one that can or will be available tomorrow! But they could be available relatively soon, with political courage and changes in consumer behavior and perceptions. Increased competition at the pump from alternative fuels, including ethanol, electric vehicles, natural gas and, perhaps in the near future, fuel-cell technology and a range of biofuels, would generate more stability and lower prices in the gas market. Public support for applied research into alternative fuels, particularly options that currently aren’t ready for prime market time, is also necessary. Congressional willingness to pass open-fuels legislation, converting gas stations to, in effect, fuel stations, would help.
The EPA’s willingness to lessen the expenses and speed up the process associated with certification of kits able to convert internal combustion engines to run on E85, and to test and increase the number and classes of potentially convertible flex-fuel vehicles, would create demand and supply. Detroit’s willingness to increase production of new flex-fuel vehicles would provide a real “fuel additive.”
William Shakespeare’s whys and wherefores could become a happening? If so, California Dreaming (The Mamas & the Papas) about lower fuel costs and environmentally friendly fuel could become a reality. Oh, and I just paid $4.33 for regular gas at my friendly gas station!
Southern Californians are in a state of shock. Again. Prices for regular unleaded gasoline shot up literally overnight late last week, and they continued climbing this week: According to GasBuddy.com, the average price for 87-octane gas in the Los Angeles area was $4.155 Monday, up 20 cents from Sunday, and 60 cents over the past week.
At some stations, the disparity was even more of a jolt: At a 76 station in Sherman Oaks, the price went from $3.99 to $4.59 in minutes last Friday; at a Mobil in North Hollywood, it was $4.99. The national average was only $2.78, a benchmark tied to the relatively low price of oil, which stood at $57.85 Monday.
It’s a familiar ritual in SoCal: Prices jump for no apparent reason (at least this time no one can say they weren’t warned); oil companies and refineries offer rationalizations, based on byzantine economic factors; often people in power demand answers, possibly even scheduling some kind of inquiry or legislative hearings; and then prices float back down again, never as quickly as they rose, and consumers forget about what the heck just happened.
The latest explanation, as parroted by many among the local media, is this: There’s a shortage of gasoline inventory, and a drop in fuel imports coming from overseas. California has a cleaner standard for gas than the rest of the country. And by the way, it’s summer, etc. Allison Mac, an analyst for GasBuddy, also said the explosion and fire at the ExxonMobil refinery in Torrance back in February has had a lingering effect: “That is still down,” she told NBC4, adding that the refinery accounts for about 10 percent of SoCal’s gasoline supply.
Jamie Court, president of the Santa Monica-based group Consumer Watchdog, suspects price-fixing. “Make no mistake, this is all about pure profits for the oil companies,” he told KTLA-TV. “Crude oil costs are like under $60 a barrel right now. We have four refineries that control 78 percent of the market. All they have to do is pull a couple ships coming in, and the prices go up 60 cents in a night.”
Consumers have a right to be outraged. But many of them are strangely resigned, insisting they have no control over the gyrations of the gas market.
“We have to pay for gas. I mean, like, we’ve got to get around. There’s no getting around it.” — Jaclyn Williams, Van Nuys, to ABC7.
“What are you gonna do? I mean, you gotta … I actually bike to work a couple times a week, so I try to balance it out like that. –- Jason Bielawski, Los Angeles, to Channel 5.
“The price went up real bad. Whose fault is it? Let’s blame somebody,” he joked. “What can we do?” — Frank Zamarripa, Santa Ana, to the Orange County Register.
Drivers don’t have to just take it, and they don’t have to start riding a bike in L.A. traffic (if you do, use a scuba tank). All they have to do is start using E85, which is up to 85 percent ethanol (a cleaner-burning, cheaper fuel) and 15 percent gasoline (the dirtier, crazy-expensive fuel).
You might be driving one of the more than 17 million flex-fuel vehicles, which can take any ethanol blend up to E85. Others who don’t own an FFV are filling up on E85 anyway, owing to the attractive price point. There are more than 2,600 stations that sell E85, including many in Southern California. I dropped in at the G&M station at Beach Boulevard and Warner Avenue in Huntington Beach. The station has two Propel Fuels pumps that dispense E85 (Propel the company featured in PUMP the Movie), and the best attribute of ethanol is right there on the marquee:
$2.99. That’s the price G&M was charging Monday for E85, a full dollar less than 87 unleaded.
Despite that differential, the green Propel island was getting no love from customers. Someone had just been there, a truck, it seemed, because it had just pumped 24.7 gallons for $74.00. The other drivers lined up to pay the exorbitant price for gasoline.
They included Janet Martin, a web designer from Laguna Beach, who filled up her Toyota Camry. “I think it’s greed,” she said when asked her theory of high prices. “It seems to get more expensive when it’s tourist season or summer vacation, where people are using their cars more often.
“It’s frustrating, but we have no control. It’s the people up on top, it’s the people who have the money, it’s the people that are in charge of the corporations …”
As long as oil remains our predominant fuel choice, American consumers will continue to be vulnerable to market gyrations. Prices go up and down, sometimes based purely on market forces, other times based on events in the Middle East, other times still based on not much at all. As former Shell Oil president John Hofmeister says: “We will never get past the volatility of oil until we get to alternatives to oil.”
Californians should know this better than anyone by now, and they should be first in line to demand alternatives. Learn more about what you can do at our Take Action page.
It’s road-trip time, America. Even if life, liberty and the pursuit of acceleration aren’t specifically outlined in the Constitution or its 27 amendments, the freedom to drive wherever we want, whenever we want, is deeply ingrained into the national identity.
Some 42 million people plan on traveling at least 50 miles during the holiday weekend, the most since 2007, according to AAA. They’ll enjoy gasoline prices that are at their lowest in years: The national average for a gallon of regular 87-octane gas stood at $2.767 Thursday, 90 cents cheaper than a year ago.
At Fuel Freedom, we believe the best way to drive prices even lower and keep them that way is to introduce fuel choice at the pump. Alcohol fuels like ethanol and methanol are cheaper and cleaner, saving consumers money, cut air-pollution levels and reduce our dependence on oil, one-third of which is imported.
But even if you care about none of those things, there’s this: Ethanol rocks. It pops. It cranks. E85 blend, which is up to 85 percent ethanol and the rest gasoline, increases power and performance in engines, largely because more of the fuel’s energy content is used up when it burns. Because of the high oxygenation of ethanol, the pure form of the alcohol has an octane of 113. E85, whose ethanol content can vary depending on the season, usually has a rating of 105.
In fact, blending ethanol into the nation’s gasoline supply to make E10 is how oil refineries are able to bring the octane of their products up from weak tea to 87, 89 and 91. It also helps clean fuel systems, which is how oil companies were able to get harmful additives (benzene, toluene and xylenes) out of gasoline without sacrificing performance.
High octane is a reason why IndyCar races on E85 and NASCAR runs on E15. It’s a reason why racing and muscle-car enthusiasts put on their mad-scientist caps and convert their prized vehicles to run on E85. Here’s a terrific primer by Hot Rod’s Jeff Smith, and here’s a cool video of a Northern California guy talking jargon at 3,000 RPMs about his E85-converted 1967 Camaro:
So happy 239th birthday, America. It’s a perfect time to declare your independence from oil addiction. Go big, go ethanol, and go forth.
- Is your car a flex-fuel vehicle? Use this tool to find out
- Ex-Shell chief: U.S. must become more oil independent
- 10 people who turned anger at gas prices into action
- PUMP is on Netflix, so stream at your leisure
- Henry Ford made the original flex-fuel vehicle
(Photo credit: FT86club.com)