Gasoline Price Changes - Federal Trade Commission

THE DYNAMIC OF SUPPLY, DEMAND, AND COMPETITION
to-WTI crude margins in the Gulf Coast is 7.76. The difference between these two standard
deviations is statistically significant. In other words, there are less than five chances in one
hundred that the variability in retail-to-WTI crude margins in the East Coast, the Midwest, and
the Rocky Mountain states combined is the same as the variability in those margins on the Gulf
Coast. 73
4. Differences in access to pipelines and substitutable gasoline supplies
appear most significant in explaining these differences in the
variability of gasoline prices in different locations in the U.S.
Table 4-4 illustrates the importance of pipeline access to reducing gasoline price
variability. Table 4-4 presents standard deviations to show the variability in retail-to-WTI crude
margins in areas that use conventional gasoline year-round and that are located along the
Colonial and Plantation pipelines. These major pipelines run from the Gulf Coast along the East
Coast to the mid-Atlantic.
Table 4-4: Conventional Gasoline Gross Product Margin
Variability Along the Colonial and Plantation Pipelines
(2002-2004)
PADD State Fuel Type
Standard Deviation
(Retail to WTI)
III Louisiana Conventional $0.0926
III Mississippi Conventional $0.0905
III Alabama Conventional $0.0917
I.C Georgia Conventional $0.0920
II Tennessee Conventional $0.0923
I.C South Carolina Conventional $0.0884
I.C North Carolina Conventional $0.0939
I.C Virginia Conventional $0.0958
The data in table 4-4 are arranged roughly from south to north, the direction of the two
parallel pipelines and their spurs. See Figure 4-10, supra. The data points run through
Louisiana, Mississippi, Alabama, Georgia, Tennessee, South Carolina, North Carolina, and
Virginia. 74 Along this geographic progression, the standard deviations range between $0.0926 in
Louisiana to $0.0958 in Virginia, which means the prices tend to move together. The differences
in these standard deviations are very small. Thus, it appears that the Colonial and Plantation
pipelines effectively tie these retail areas to their primary supply centers in the Gulf.
A closer look at the variability of gasoline prices within South Carolina also suggests the
importance of pipeline access in reducing the variability of gasoline prices. Table 4-5 shows the
standard deviations for retail-to-WTI margins in several areas in South Carolina. The areas are
listed in terms of proximity to pipeline terminals, with areas at the top of the list closer to
pipeline terminals and those at the bottom of the list farther away from pipeline terminals.
Greenville-Spartanburg-Anderson has the lowest variability – a standard deviation of $0.0884;
Colonial and Plantation pipeline terminals in Spartanburg serve that area. Columbia, which is
CHAPTER 4: THE REGIONAL LEVEL 95