Gasoline Price Changes - Federal Trade Commission

THE DYNAMIC OF SUPPLY, DEMAND, AND COMPETITION
limited number of refineries outside of California that make CARB gasoline and California’s
isolation from major pipelines connected with other major refinery centers reduce sources of
substitute gasoline. Indeed, if California had better pipeline connections to the Gulf or other
areas with large refining capacity, more refiners outside of California might have greater
incentives to make CARB gasoline or blending components suitable for CARB gasoline.
b. Relatively limited access to pipelines may contribute to higher
annual average real retail gasoline prices in the Rocky Mountain
states and the West Coast.
Although environmental requirements are important on the West Coast, the same trend
toward higher average prices appears in the Rocky Mountain states, where environmental
requirements are less restrictive. This suggests there are other possible sources of higher average
prices.
The Rocky Mountain states also have relatively limited access to pipeline connections to
supply substitute gasoline in the event of a shortage. By contrast, the East Coast and the
Midwest are much better connected to pipelines that can supply substitutable gasoline in the
event of a shortage. These differences may contribute to the price differences shown in Table 4-
1. For the Rocky Mountain states, price differences may diminish if pipeline projects come to
fruition and pipeline connections are increased. Other factors, however, may have also
contributed to higher average prices in both the Rocky Mountain states and the West Coast.
D. Boutique Fuels and Differential Access to Gasoline Supplies Can Contribute
to Gasoline Price Variability in Particular Circumstances.
One issue of concern to consumers is the extent to which gasoline prices seem to have
become more variable. See Box 4-3 discussing how to measure price variability. Consumers in
some regions – especially the West Coast – perceive more price variability than in the past.
There are at least two possible explanations for price variability. First, the large number
of different boutique fuel requirements throughout the country may have caused greater price
variability because they cannot use conventional gasoline as a substitute for supply. Boutique
fuels include various types of RFG, less volatile summer gasoline, 67 ultra-low-sulfur gasoline
(such as the low-sulfur gasoline currently used in Atlanta, GA), winter-oxygenated gasoline, and
gasoline mandated by CARB.
CHAPTER 4: THE REGIONAL LEVEL 91