MOTOR FUELS: CALIFORNIA GASOLINE PRICE BEHAVIOR

Retail gasoline prices in the United States have risen sharply since early 1999, mostly in response to sharply rising world crude oil prices. Due to concern about the higher gasoline prices and the extent of price spikes in California, the General Accounting Office (GAO) was asked to analyze the behavior of gasoline prices in the state. For this report, a spike was defined as an increase of at least 6 cents per gallon in a 4- to 21-week period. This report addresses the following questions: (1) To what extent do retail gasoline prices spike more frequently and higher in California than they do in the rest of the United States, and what factors account for any difference? (2) Do retail gasoline prices in California rise faster than they fall in response to increases and decreases in the wholesale price of gasoline and, if so, why? (3) What factors account for differences in the retail prices of gasoline between San Francisco and Los Angeles? Briefly, according to GAO's analysis of gasoline price data, from January 1995 through December 1999, retail gasoline prices spiked no more frequently in California than they did in the rest of the United States, but the spikes that did occur were generally higher in California than elsewhere in the nation. Many federal, state, and oil industry officials told the GAO that the higher price spikes in California were caused primarily by unplanned refinery outages that disrupted the state's tight balance between gasoline supply and demand. Supply disruptions caused by refinery outages must be made up by other sources, frequently out-of-state providers. However, obtaining gasoline from such providers is slow and costly because only a few out-of-state refineries can produce gasoline that meet the state's stringent emission-reducing standards and the gasoline must be shipped by tanker from far away. According to the results of statistical modeling by the Department of Energy's Energy Information Administration, retail gasoline prices in California rise faster than they fall in response to a delayed pass-through of changes in the wholesale prices of gasoline. Retail gasoline prices are higher in San Francisco than in Los Angeles, in part because of local supply and demand conditions.

Language

  • English

Media Info

  • Features: Appendices; Figures;
  • Pagination: 27 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00793884
  • Record Type: Publication
  • Report/Paper Numbers: GAO/RCED-00-121,, HS-043 055
  • Files: HSL, NTL, TRIS
  • Created Date: Jun 14 2000 12:00AM