Gasoline Price Changes - Federal Trade Commission

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THE DYNAMIC OF SUPPLY, DEMAND, AND COMPETITION some major oil producers. For the most part, production actually did not decrease significantly in any of the areas of concern. However, even incidents that do not directly affect current crude oil production can create concerns and fears about potential crude supply disruptions and thus contribute to increases in crude spot and futures prices. III. GASOLINE SUPPLY, DEMAND, AND COMPETITION PRODUCED RELATIVELY LOW AND STABLE ANNUAL AVERAGE REAL U.S. GASOLINE PRICES FROM 1984 UNTIL 2004, DESPITE SUBSTANTIAL INCREASES IN U.S. GASOLINE CONSUMPTION. A review of annual average U.S. gasoline prices in real terms over the past decades reveals surprisingly low prices. Despite ever-growing gasoline consumption in the U.S., increased gasoline supply from U.S. refiners and imports, as well as relatively stable crude oil prices, kept U.S. gasoline prices in check throughout the 1990s. These prices reflect national averages that do not capture regional differences, to be discussed in the succeeding section. Yet they provide an important historical perspective on gasoline prices over the past 20 years. $ U.S. Consumer Demand for Gasoline Has Risen Substantially, Especially Since 1990. In 1978, U.S. gasoline consumption was about 7.4 million barrels per day. By 1981, in the face of sharply escalating crude oil and gasoline prices and a recession, U.S. gasoline consumption had fallen by roughly a million barrels per day, averaging about 6.5 million barrels per day. As gasoline prices began to fall in the 1980s, U.S. consumption of gasoline began to rise once again. In 1993, U.S. gasoline consumption rose above 1978 levels; it has continued to increase at a fairly steady rate since then. In 2004, U.S. gasoline consumption averaged about 9 million barrels per day. U.S. gasoline consumption continues to rise, with the U.S. Energy Information Administration (EIA) forecasting 2005 demand at an average of 9.2 million barrels per day. $ Increased Gasoline Supply from U.S. Refineries and Imports Helped to Meet Increased U.S. Demand for Gasoline and Keep Gasoline Prices Relatively Steady. A comparison of “real” average annual retail gasoline prices and average annual retail gasoline consumption in the U.S. from 1978 through 2004 shows that, in general, gasoline prices remained relatively stable despite significantly increased demand. See Figure 3-6. “Real” prices are adjusted for inflation and therefore reflect the different values of a dollar at different times; they provide more accurate comparisons of prices in different time periods. “Nominal” prices are the literal prices shown at the time of purchase. EXECUTIVE SUMMARY vii
GASOLINE PRICE CHANGES: Figure 3-6: U.S. Annual Average Gasoline Consumption and Real National Gasoline Prices (1978-2004) 10,000 250.00 Gasoline Consumption (Thousand Barrels per Day) 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 0 1978 1979 1980 Source: EIA, BEA Gasoline Consumption Real Gasoline Prices (2004 Dollars) 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 $ For Most of the Past 20 Years, Real Annual Average Retail Gasoline Prices in the U.S., Including Taxes, Have Been Lower than at Any Time Since 1919. This analysis examines real annual average retail gasoline prices in the U.S., including taxes, from 1919 to 2004. The data show that, from 1986 through 2003, using 2004 dollars, real national annual average retail prices for gasoline, including taxes, generally have been below $2.00 per gallon. By contrast, between 1919 and 1985, real national annual average retail gasoline prices were above $2.00 per gallon more often than not. Data from 1978 forward allow us to exclude taxes from the analysis. Prices that exclude taxes give a better sense of market dynamics, because gasoline taxes vary from state to state, are not set by market forces, and represent a large proportion of the annual average U.S. retail price for a gallon of gasoline. For example, from 1991 through 2004, taxes contributed on average 30.3 percent of the U.S. annual average retail price of gasoline. If taxes are excluded, the data show that real annual average retail gasoline prices in the U.S. did not rise above $1.20 per gallon between 1986 and 2003, and generally ranged between $0.80 and $1.05 per gallon. See Figure 3-2. In 2004, however, those prices rose sharply to $1.44. This is the highest real national annual average retail price per gallon since 1984, but it remains well below the 1981 high of $2.10 per gallon. viii 200.00 150.00 100.00 50.00 0.00 Cents per Gallon (Excluding Taxes) FEDERAL TRADE COMMISSION, JUNE 2005
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Page 21 and 22: Table of Contents EXECUTIVE SUMMARY
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Page 55 and 56: Million Barrels per Day 0.9 0.8 0.7
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such as ethane, ethylene, and propa
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THE DYNAMIC OF SUPPLY, DEMAND, AND
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CHAPTER 3. SUPPLY, DEMAND, AND COMP
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Year-over-year Percentage Change in
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Capacity (Million Barrels per Calen
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Endnotes THE DYNAMIC OF SUPPLY, DEM
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CHAPTER 4. SUPPLY, DEMAND, AND COMP
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Price Difference (Cents per Gallon)
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Millions of Barrels 1,500 1,250 1,0
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Millions of Barrels per Day 9 8 7 6
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CHAPTER 5. STATE AND LOCAL POLICIES
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Percentage of Customers Lost to 1%
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Retail Price (cents per gallon) 220
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Share (Percent) 80 70 60 50 40 30 2
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Price (Cents per Gallon) 200 190 18
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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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