Gasoline Price Changes - Federal Trade Commission

THE DYNAMIC OF SUPPLY, DEMAND, AND COMPETITION
from either West Coast refineries through a pipeline or other terminals by truck – both at higher
cost. 14
F. Effects on Gasoline Prices in Phoenix, Tucson, and Other Parts of Arizona,
and on the West Coast.
The Commission’s Gasoline Price Monitoring project captured the impact of these events
on gasoline prices in Phoenix, Tucson, and other parts of Arizona, as well as California,
Washington, and Oregon.
Prices in Phoenix. As shown in Figure 1-4, soon after the shutdown of the pipeline, retail
gasoline prices in Phoenix were above the predicted range based on historical relationships. The
apex of the price spike was relatively short-lived: retail gasoline prices in Phoenix declined by
about $0.31 per gallon between the last week of August and the end of September. 15
Price (Cents per Gallon)
220
200
180
160
140
120
100 0
7/1/2003
Source: OPIS
Figure 1-4: Phoenix and Tucson Retail Gasoline Actual Price and Upper Bound of
Predicted Price Range, Regular Unleaded (Daily OPIS; Includes taxes)
7/8/2003
7/15/2003
7/22/2003
7/29/2003
8/5/2003
8/12/2003
Phoenix-Mesa, AZ Phoenix-Upper Bound
Tucson, AZ Tucson--Upper Bound
Nonetheless, prices remained significantly higher than July’s price levels. At least two
factors worked to keep prices from falling back to pre-pipeline-rupture levels. First, Phoenix
continued to have a greater than normal dependence on more expensive gasoline from the West
Coast, because the temporary bypass on the Tucson-to-Phoenix line had less capacity than the
regular pipeline. Second, the end-of-summer demand for gasoline in 2003 was higher than
predicted, which lowered inventories throughout the United States after the end of August and
CHAPTER 1: SUPPLY, DEMAND, AND COMPETITION 5
8/19/2003
8/26/2003
9/2/2003
9/9/2003
9/16/2003
9/23/2003
9/30/2003