Gasoline Price Changes - Federal Trade Commission

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GASOLINE PRICE CHANGES: Millions of Barrels 1,500 1,000 500 0 -500 -1,000 Figure 4-6: Gasoline Consumption, Production, Imports, and Inter-PADD Shipments (2003) I II III IV V PADD Number Consumption Refinery Production Imports Receipts from other PADDS Deliveries to other PADDS Source: EIA Note: Gasoline consumption is what EIA reports as "product supplied," which is the sum of refinery production, imports, receipts from other PADDs, other production, and decrease in gasoline stocks, less shipments to other PADDs and exports. Access to refined product pipelines also varies widely among different regions in the U.S. The refined product pipeline system in the U.S. generally runs between refineries and areas of gasoline consumption that have less or no refinery capacity. Pipelines accounted for 81 percent of the shipments of refined petroleum products between PADDs in 2003, but pipeline importance varies substantially across geographic areas. 35 See Box 4-2. 80 FEDERAL TRADE COMMISSION, JUNE 2005
THE DYNAMIC OF SUPPLY, DEMAND, AND COMPETITION Box 4-2: Pipeline Transportation of Gasoline Refined product pipelines typically are regulated by the Federal Energy Regulatory Commission or state regulatory agencies. The price of transportation on regulated pipelines represents a small percentage of the total cost of gasoline. For example, the average cost of moving a gallon of gasoline by pipeline 1,000 miles from the Gulf Coast to the Chicago region is approximately $0.02. At typical pipeline speed of between 3 and 8 miles per hour, such a trip would take approximately 12 days. See Cooper 8/2 at 1; Jacobs 5/8 at 109; Coleman 8/2 at 129. See PETROLEUM MERGER REPORT 164-65 for discussion of pipeline regulation. Pipeline owners and others report that pipeline expansion is difficult for many reasons, including the difficulty of obtaining construction permits. Cooper 8/2 at 4; see also Jacobs 5/8 at 117, 171; Morgan 5/8 at 125. Nonetheless, several pipeline expansion projects to allow Gulf Coast gasoline to reach the Midwest and the Southwest are underway or have been completed; such projects can significantly improve access to gasoline supplies in those areas. If an area must obtain refined petroleum from marine transport, a federal statute known as the Jones Act 36 increases the transportation costs. The Jones Act requires that any product transported by vessel between U.S. ports be carried in domestically-built ships staffed by U.S. crews, which is more expensive than carriage by foreign-built, foreign-staffed ships. A recent government estimate of the total welfare cost of the Jones Act for all tanker shipping is $656 million dollars a year, based on the assumption that a foreign ship has operating costs of only 59 percent of a Jones Act ship. 37 The observed cost of transportation of refined petroleum products from the Gulf to the West Coast, $0.10 to $0.25 per gallon, 38 implies that the Jones Act imposes an additional cost of about at least 4 cents per gallon when it is necessary to transport gasoline using Jones Act ships. 39 1. The Gulf Coast (PADD III) has plentiful access to gasoline supplies. The Gulf Coast has long had the greatest number of refineries, as well as the largest amount of refining capacity, of any region in the United States. 40 Gulf Coast refineries together have the capacity to produce a much greater quantity of gasoline than the region demands. As Figure 4-6 shows, PADD III’s gasoline production in 2003 (roughly 1.3 trillion barrels of gasoline) far exceeded its gasoline consumption in 2003 (roughly 479 million barrels). As a result, the Gulf Coast supplies a large proportion of the gasoline sold in the U.S. As shown in Figure 4-7, in both 1986 and 2005, Gulf Coast refining capacity represented approximately 46 to 47 percent of the refining capacity in the U.S. Although the relationship among PADDs in terms of percentage of U.S. refining capacity has changed relatively little since the 1980s, PADD III’s increase in refining capacity from 1986 to 2005 – from around 7 million barrels per day to just over 8 million barrels per day – was the greatest of any PADD. See Figure 4-8. CHAPTER 4: THE REGIONAL LEVEL 81
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Federal Trade Commission DEBORAH PL
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GASOLINE PRICE CHANGES: The vast ma
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GASOLINE PRICE CHANGES: $ The World
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GASOLINE PRICE CHANGES: expect incr
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GASOLINE PRICE CHANGES: Figure 3-6:
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GASOLINE PRICE CHANGES: $ Increased
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GASOLINE PRICE CHANGES: $ Since 199
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GASOLINE PRICE CHANGES: increase lo
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GASOLINE PRICE CHANGES: England and
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Table of Contents EXECUTIVE SUMMARY
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C. In 2004, the Geopolitical Outloo
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CHAPTER 4: SUPPLY, DEMAND, AND COMP
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3. Gasoline prices in the East Coas
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CHAPTER 1. SUPPLY (INFLUENCED BY OP
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To obtain the additional supply the
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THE DYNAMIC OF SUPPLY, DEMAND, AND
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Price (Cents per Gallon) 220 200 18
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words, short-run demand for gasolin
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Endnotes THE DYNAMIC OF SUPPLY, DEM
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CHAPTER 2. WORLDWIDE SUPPLY, DEMAND
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Thousand Barrels per Day 18,000 16,
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Million Barrels per Day 0.9 0.8 0.7
Page 57 and 58: THE DYNAMIC OF SUPPLY, DEMAND, AND
Page 61 and 62: such as ethane, ethylene, and propa
Page 65 and 66: CHAPTER 3. SUPPLY, DEMAND, AND COMP
Page 75 and 76: Year-over-year Percentage Change in
Page 79 and 80: Capacity (Million Barrels per Calen
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Page 99 and 100: Price Difference (Cents per Gallon)
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Page 111 and 112: Millions of Barrels per Day 9 8 7 6
Page 131 and 132: CHAPTER 5. STATE AND LOCAL POLICIES
Page 133 and 134: Percentage of Customers Lost to 1%
Page 135 and 136: Retail Price (cents per gallon) 220
Page 137 and 138: Share (Percent) 80 70 60 50 40 30 2
Page 141 and 142: Price (Cents per Gallon) 200 190 18
Page 157 and 158: 6. GAO, supra note 5, at 20. 7. Id.
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Herfindahl-Hirschman Index (HHI) Th
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Gasoline Price Changes - Federal Trade Commission

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