Price of gas pumped up, but it fuels no outrage

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The San Diego Union-Tribune

With the beginning of the summer driving season, hundreds of thousands of Southern Californians took to the road this weekend, turning vast stretches of freeway into some of the nation’s longest parking lots.

Judging from the crowded freeways, it’s hard to tell that gasoline prices are hovering around their highest point ever. But even after adjusting for a quarter-century’s worth of inflation, we’ve neared the highs of the 1970s and early 1980s, when things got so bad that we briefly rationed gasoline.

Nationwide, the average price of gas reached $3.23 a gallon on Friday. In comparison, gas hit an inflation-adjusted high of $3.29 in March 1981, in the wake of an energy crisis that helped cost Jimmy Carter the presidency.

In San Diego County, prices “moderated” to $3.38, after soaring to $3.50 early this month. And we’re not at the top of the market. In the continental United States, that distinction belongs to Chicago, where gas averages $3.65 per gallon because of higher taxes and strict clean-air standards.

Illinois, Indiana and Michigan have average prices above California, which is closely followed by Wisconsin, Nebraska and Washington. In California, San Diego’s prices are outpaced by San Francisco, which averages a tax-infused $3.59.

You’d think that the price spikes would spark some drastic responses.

During the oil crises of the ’70s and ’80s, after all, Congress levied a tax on the oil companies’ windfall profits. The White House briefly imposed odd-even gas rationing, in which drivers with odd-numbered license plates could buy gas only on odd-numbered days.

Drivers switched to compact cars, which led to the death of “boats” such as the Ford Galaxie (not to be confused with the Galaxy minivan) and the downsizing of the Chevy Impala and other super-sized sedans.

This time, the response is much more tepid.

True, Congress last week passed a bill to outlaw “unconscionably excessive” gasoline prices, despite the objections of Reps. Darrell Issa of Vista, Brian Bilbray of Carlsbad and 139 other members of Congress.

But President Bush is likely to veto the bill. And even if it survives — it may have enough support to withstand a veto — it is so vaguely worded that it will probably have little effect on skyrocketing prices.

Bush’s main initiative has been to order federal agencies to slash their gasoline use by 20 percent over the next decade. But he gave the agencies until the end of 2008 to develop gas-cutting plans, meaning they might not start to implement the plans until three weeks before he leaves office. The costs and benefits of the plans will be left to the next president to deal with.

Bush’s sluggishness on oil reform is matched by Rep. Charles Dingell, the Michigan Democrat who heads the House Energy and Commerce Committee. Dingell, the auto industry’s favorite Democrat, rejects the idea of raising fuel-economy standards on vehicles because it “has become a stale and sterile debate.”

Of course, an octogenarian who has been in Congress since 1955 might have some unique ideas about the meaning of the word “stale.” But his thinking represents the kind of brain paralysis that leads Detroit to pump out gas-guzzling behemoths while Japan and South Korea gain dominance with more
fuel-efficient cars.

Oddly, the run-up in gas prices has come despite a softening of oil prices. The price of oil declined more than 15 percent from last July through mid-May, when it began to rise again.

If the market had acted as it usually does, the price of gas should have dropped at least 11 cents a gallon instead of climbing to near-record highs, says Charles Langley, gasoline analyst with San Diego’s Utility Consumers’ Action Network, or UCAN, which monitors local energy and utility costs.

So if oil is down, why is gas up? Ask the Big Oil executives, some of whom have doubled the profits they earn from refinery operations.

For every barrel of oil being used to produce gasoline, refineries are now making an estimated $30 in pre-tax profits. That translates to at least $1 in profits for every gallon of gasoline you buy, according to Judy Dugan, oil specialist at Santa Monica’s Foundation for Taxpayer and Consumer Rights.

And that doesn’t count the profits attached to the oil or the distribution and sale of the gasoline.

The oil conglomerates blame a series of maintenance shutdowns and freak accidents at refineries, such as the strange story of a raccoon shorting out a power line to an ExxonMobil refinery in Torrance and an opossum doing the same to Shell‘s refinery in Wilmington, both within a 24-hour period.

Californians have heard about freak shutdowns before (although the raccoon and opossum are a new wrinkle), during the electricity crisis in 2001. At that time, power producers said that maintenance closures and energy bottlenecks had choked supplies, pushing electricity rates sky high.

It later turned out that companies such as Enron and Reliant were manipulating the market to squeeze out more profits. It would be nice to think that’s not true in the oil industry, which has always acted in an aboveboard fashion.

Whether through happenstance or manipulation, a sustained rise in gasoline prices could weaken the nation’s already faltering economic growth, especially in high-cost markets such as San Diego.

Between Jan. 1 and May 15, local gas prices averaged $2.99 per gallon, according to UCAN. That’s 20 cents per gallon higher than the same period last year.

Using that $2.99 per gallon price tag and a driving average of 12,000 miles per year, the average San Diego household will spend $254 more on gasoline this year than last year, based on data from the California Air Resources Board. Countywide, that would reflect a total increase of more than $270 million — money that will not be spent supporting local stores, bars and restaurants or paying down mortgages and credit card bills.

The impact varies, of course, depending on what kind of car you drive and how much you drive it. A typical Hummer driver would pay $3,986 for gasoline this year, or $266 more than last year. The owner of a new Honda Civic hybrid would pay $739, or $50 more than last year.

There’s increasing evidence that Californians are shifting toward more fuel-efficient vehicles, although there’s still a way to go. The California Motor Car Dealers Association reports that vehicle sales in the first quarter were 7 percent lower than in the first quarter last year, mostly because of declines in sales of full-size and mid-size SUVs, full-size trucks, large mid-sized cars and luxury cars.

In comparison, the best sellers were compact SUVs — not exactly hybrids, but certainly more fuel-efficient than the full-size — as well as small, sub-compact “entry” cars such as the Toyota Yaris.

Thanks to the smaller cars and more conservation, we are making at least a bit of a dent in our gas usage. Last year, for instance, drivers cut back an average of 1 percent in the wake of rising prices, according to UCAN.

But those cutbacks can be short-lived. When gas prices dipped this past winter, consumption rose by 1 percent, as drivers returned to the pumps.

A Washington Post-ABC News poll last week found that gas prices would have to rise to $5.12 per gallon in the western United States before drivers substantially cut back on driving. That makes us easy targets for the oil companies. If we’ll buy gas that high, why shouldn’t they mark it up? Isn’t that the American way?

Judging from the state of our local freeways this weekend, they have plenty of willing customers. And it’s unlikely that prices will drop significantly lower unless we significantly change our habits.

Consumer Watchdog
Consumer Watchdog
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