Gasoline Price Changes - Federal Trade Commission

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C. Real and Nominal Annual Average Gasoline Prices in the U.S., Including Taxes, from 1919 to 2004................................................................................................. 45 D. Year-by-Year Percentage Price Changes from 1979 through 2004...................... 46 E. Price Trends for 2005............................................................................................ 47 IV. INCREASED GASOLINE SUPPLY FROM U.S. REFINERIES AND IMPORTS HAS HELPED TO MEET INCREASED U.S. DEMAND FOR GASOLINE AND KEEP GASOLINE PRICES RELATIVELY STEADY ............................................ 48 A. U.S. Consumer Demand for Gasoline Has Risen Substantially, Especially Since 1990....................................................................................................................... 48 B. U.S. Refiners Have Increased Gasoline Supplies and Captured Cost Savings Over the Past 20 Years................................................................................................... 49 1. Rather than build new refineries, U.S. refiners have increased the average size and capacity of existing refineries ..................................................... 49 a. Historical background: government regulations in the 1970s encouraged excess crude oil refining capacity and overbuilding of U.S. refineries ............................................................................... 50 b. General trends: the increased size and capacity of an average U.S. refinery reflect economies of scale........................................ 51 2. U.S. refineries have adopted more efficient technologies and business methods..................................................................................................... 53 a. Downstream processing units have increased refineries’ abilities to process different kinds of crude and produce more high-value refined product for each barrel of crude processed ..................... 53 b. Changes in inventory strategies have reduced refinery costs....... 54 3. U.S. refineries have high rates of capacity utilization .............................. 56 4. Nonetheless, new environmental regulations have required substantial investments in refineries, and a gallon of environmentally mandated gasoline costs more to produce than a gallon of regular gasoline ............ 57 C. Imports of Gasoline into the U.S. Have Risen over the Past Decade ................... 59 V. Profits Play Necessary and Important Roles in a Market Economy. In the Oil Industry, Profits Have Varied Widely Over Time ...................................................... 59 A. Profits Play Necessary and Important Roles in a Market Economy..................... 60 B. Profits in the Oil Industry Have Varied Over Time, Over Industry Segments, and Among Firms ........................................................................................................ 60 TOC-4
CHAPTER 4: SUPPLY, DEMAND, AND COMPETITION IN GASOLINE AT THE REGIONAL LEVEL...................................................................................... 69 I. REGIONAL DIFFERENCES IN ACCESS TO GASOLINE SUPPLIES AND ENVIRONMENTAL REQUIREMENTS FOR GASOLINE AFFECT REGIONAL GASOLINE PRICES.................................................................................................. 69 II. SEVERAL EXAMPLES ILLUSTRATE THE SOURCES OF REGIONAL DIFFERENCES IN GASOLINE PRICES ................................................................. 69 A. Access to Refineries Can Affect Gasoline Prices................................................. 70 1. In the Upper Midwest, where refining capacity is not sufficient to meet consumer demand, two refinery fires in the spring and summer of 2001 caused wholesale and retail gasoline price spikes .................................... 70 2. By contrast, a refinery outage in an area with ample, nearby sources of gasoline supply had no appreciable impact on wholesale or retail gasoline prices......................................................................................................... 71 B. Access to Refined Product Pipelines Can Affect Gasoline Prices........................ 72 1. A pipeline outage on the Wolverine pipeline in June 2000 caused a price spike in Detroit, Michigan, which relies heavily on gasoline supplies brought in by that pipeline ........................................................................ 72 2. During the summers of 2001-2004, higher wholesale gasoline prices in Denver, Colorado, reflected Denver’s significant reliance on pipeline supplies ..................................................................................................... 73 C. Boutique Fuel Requirements Can Affect Gasoline Prices.................................... 74 1. In Detroit, the need to use environmentally mandated gasoline exacerbated gasoline price spikes due to a pipeline break in June 2000 and refinery shutdowns during the blackout of August 2003 ....................................... 74 2. In the Northeast, a major shift in the type of environmentally mandated fuel occurred without significantly increased gasoline prices or price variability .................................................................................................. 75 D. Other Factors Can Reduce Average Gasoline Prices but Exacerbate Gasoline Price Spikes........................................................................................................... 76 1. Low inventory levels................................................................................. 76 2. High rates of capacity utilization .............................................................. 76 TOC-5
Page 2: Federal Trade Commission DEBORAH PL
Page 5 and 6: GASOLINE PRICE CHANGES: The vast ma
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Page 21 and 22: Table of Contents EXECUTIVE SUMMARY
Page 23: C. In 2004, the Geopolitical Outloo
Page 27 and 28: 3. Gasoline prices in the East Coas
Page 29 and 30: CHAPTER 1. SUPPLY (INFLUENCED BY OP
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Page 35 and 36: Price (Cents per Gallon) 220 200 18
Page 37 and 38: words, short-run demand for gasolin
Page 39 and 40: Endnotes THE DYNAMIC OF SUPPLY, DEM
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Page 49 and 50: Thousand Barrels per Day 18,000 16,
Page 55 and 56: Million Barrels per Day 0.9 0.8 0.7
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Year-over-year Percentage Change in
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THE DYNAMIC OF SUPPLY, DEMAND, AND
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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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