Why aren’t gasoline prices in the U.S. lower?

Why aren’t gasoline prices in the U.S. lower?

[Ed. – Because regulation.  It always costs.  Always.  No such thing as cost-free regulation.]

Thanks to a global economic slowdown, the price of oil has plunged 60%—to $40 a barrel from $96 in August 2014. Yet the price of gasoline across the U.S. has fallen by only 25% over the same period. What gives? Multiple and overlapping regulatory barriers prevent refiners from moving to alternative sources of crude and from entering markets to fill supply shortages. The result: a regulatory price premium in every gallon of gas.

Though commonly known as commodities, oil and refined fuels are increasingly design-specific products. That is, the price you pay at the pump for a gallon reflects local constraints, not merely the price of oil. No two refineries are designed identically, and no new world-scale refinery has been built in the U.S. since 1976. Meanwhile, the global oil market has grown more diverse, including heavier, unconventional tar sands and shale oils as well as relatively light and sweet benchmark crudes. …

On Aug. 9 the BP refinery in Whiting, Ind., was forced to run at 40% of capacity for more than two weeks due to an unplanned outage in one of three crude-distillation units. Already among the most expensive in the country, gasoline prices in nearby Chicago jumped almost $0.70, to $3.37 a gallon.

Meanwhile, 60 miles south in Kankakee, Ill., the price at the pump held steady at $2.65. Kankakee County sits right outside a zone that the Environmental Protection Agency deems “nonattainment,” which means that retail gasoline must be “reformulated” to minimize the potential for smog emissions. But not every gallon of gasoline is equally amenable to reformulation, which shrinks the pool of fuel available. These areas end up with higher prices as the remaining reformulated fuel is rationed among nonattainment zones.

Continue reading →


Commenting Policy

We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse.

You may use HTML in your comments. Feel free to review the full list of allowed HTML here.