(11/22/2005)

Gas Prices: Who's to Blame?

What can we do to lower our petrol bills?

BY GREG JOHNSON

DAKOTA VOICE

Who’s to blame? What can we do? It’s probably not well understood by too many why gas prices are out of control. We hear senators and representatives calling for action, but not knowing what can be done. Economists say price caps are a bad idea because we need to be deterred from using so much gasoline. These experts mostly agree that the people of America need higher gas taxes to curtail their use of this liquid that we drink so eagerly from the cup of our great and powerful Saudi masters. Our federal government tells the people that they do not have the power to place a cap on gas prices. Are there factors here in South Dakota that push gas prices beyond what we should be paying? First we need to look at the basics of pricing.

The world crude oil market sets prices by either increasing or reducing production. America has become dependent on foreign oil to the amount of 33% of the total consumed or 5 million barrels daily, just from the OPEQ nations. These include Saudi Arabia, Nigeria, Venezuela and several others. The U.S. provides 35% of its own crude oil. Typically crude oil makes up roughly 43% of the cost of gasoline. Refining costs add 13% and distributing and marketing add another 13%. Federal and state taxes (taxes vary from state to state) account for about 31% of the total cost of gasoline. Typically the markup at the pump should be a few cents to around ten cents per gallon.

South Dakota has no refineries; all products come through pipeline. The daily Transport/Tankwagon Contract Fuel Prices paid at the various pipelines can be viewed at: http://www.state.sd.us/boa/opm/downloads/Contract_Fuel_Price.htm You can see the markup in prices at the pump in your area by taking a look at this website: http://www.southdakotagasprices.com/.

If you’ve wondered why Sioux Falls gas is often lower in price than that in Rapid City, there’s a reason. The fuel prices at the pipeline running outside of Rapid City are usually higher. South Dakota’s current tax on one gallon of gasoline is $.24 and $.22 for gasohol. That’s slightly above the national average.

Many states have or are in the process of enacting tax breaks and other incentives for use of gas conserving alternatives. For example with prices remaining high, the American public will become more interested in hybrid vehicles that are already a reality. These automobiles can generate their own electricity while being driven, and are powered by gasoline and electricity. One current model is rated at 60 miles per gallon of gasoline. To further reduce gasoline consumption, South Dakota is a key player with its production of ethanol from corn. The Energy Information Administration reports interesting statistics on state by state gasoline consumption for 2004.

The US average per capita use of gasoline is 465 gallons per person. Surprisingly South Dakota comes in at the fourth highest, with 569.8 gallons per person. California is 46th with 423.8 gallons, the District of Columbia is the lowest at 214.4 gallons and Oklahoma takes the number one spot at 625.8 gallons. Several factors influence these figures, but the numbers should cause us to stop and think about our personal use of this commodity. We can each take measures to reduce our consumption and a significant reduction historically translates to an increase of supplies at hand and a reduction in costs to the consumer.

The message to consumers to conserve is difficult to accept as the best solution after we’ve experienced the pain of the pump. We might feel a little more suspicion as we drive through our towns and see gasoline prices that are identical nearly everywhere. Prices that seem to change simultaneously right to the tenth of a cent regardless of what brand the station represents. It may look like price-fixing, but that’s a charge that needs backing up by proof of collusion between the stations before the Attorney General’s Office will investigate. Note that South Dakota does not have laws on the books protecting consumers from price gouging, which is a condition defined as unfair price inflation under the guise of necessity in emergency shortage conditions.

We do need to conserve, but it’s not the only solution. We need to reduce our dependence on foreign oil. It’s been ten years since the battle began over Alaska’s Artic National Wildlife Reserve (ANWR) between environmentalists and those wishing to curtail our foreign oil dependence. ANWR is a remote 19-million acre area in the North East corner of Alaska and above the Arctic Circle. Seventeen and a half million acres of the nineteen million have strict regulations against development. According to the US Geological Survey the remaining 1.5 million acres could contain as much as 16 billion barrels of oil, possibly enough to replace all OPEQ foreign oil imports for 30 years. Had production gone ahead years before we might not have seen the drastic effects of recent hurricanes. That should be a good lesson in having only one area of oil production, the Gulf, not completely throttled by environmentalists.

Besides the Gulf, additional offshore energy can be found in the Pacific, the eastern Gulf of Mexico, the Atlantic in and Alaska. President Bush has historically called for an increase in the number of refineries in the US and for the opening of a very small portion of the vast ANWR for oil exploration. We may see approval for drilling at the ANWR this year, and if this occurs we might see the first crude by 2015. A long way off, but at least we will enact other measures that may lesson our foreign oil dependence in the meantime.

There are two other websites besides GasBuddy that are free from political backwash and offer a great deal of information about petroleum that are worth mentioning: The American Petroleum Institute and anwr.com. At anwr we learned of a nice little tip to save yourself around 11 cents per gallon – here’s how:

“Save 5% on every gallon.

Get a credit card that offers a 5% discount on gas purchases. The one I use is the Discover® Platinum Gas Card. It has no annual fee and you can extra cards free for the whole family so they can save on gas also. They're great and they have a free debt calculator where they tell you options for lowering your bills or credit card balances.) Use the credit card only for gas purchases and pay the balance off every month. Saving 5% will save you over 11 cents a gallon! Whoa! Now, check gasbuddy.com and see where you can find cheap gas in your town. If you can shave an additional nickel or a dime off, we're talking real money!”