Gasoline Price Changes - Federal Trade Commission

GASOLINE PRICE CHANGES:
Price (Cents per Gallon)
180
160
140
120
100
80
60
40
20
0
Source: EIA, BEA
Figure 4-12: Annual Average Real (2004 Dollars) Gasoline Prices, without
taxes, PADDs I, II, and III (1996-2004)
PADD III: Gulf Coast
PADD I: East Coast
PADD II: Midwest
1996 1997 1998 1999 2000 2001 2002 2003 2004
2. Producing cleaner burning fuels and limited access to infrastructure
are possible sources of higher average retail gasoline prices on the
West Coast and, to a lesser extent, in the Rocky Mountain states.
a. Producing cleaner burning fuel increases the average cost of
gasoline and raises the costs of obtaining substitute gasoline
supplies in the event of a supply shortage.
The timing of the price changes shown above suggests that they may bear some
relationship to the introduction of Phases I (1992) and II (1996) of the stringent and specialized
CARB requirements for gasoline sold in California. As noted earlier, since 1992, CARB has
required cleaner, and thus more expensive, gasoline in California than is required in other states.
Only a limited number of refineries outside of California produce CARB gasoline. 66
To some extent, the West Coast’s higher annual average real retail gasoline prices reflect
production costs associated with California’s more stringent environmental standards for
gasoline.
In addition to raising production costs for gasoline, the requirement to use CARB
gasoline in California reduces the amount of gasoline available elsewhere to replenish supplies in
the event of a shortage. It is illegal to use conventional gasoline in California, so California gas
stations cannot substitute nearby supplies of conventional gasoline for CARB gasoline. Both the
90
FEDERAL TRADE COMMISSION, JUNE 2005