Oil costs, taxes still key gasoline price components, says API
Crude oil costs and taxes are still bigger influences than refinery production and product exports in gasoline price increases, American Petroleum Institute Chief Economist John C. Felmy said. “Together, they account for over $3, or about 84%, of what people are paying at the pump today,” he told reporters. “Talk about refinery production and exports is a misleading distraction.”
Continued strong refined product output and consumer conservation measures are the best short-term responses to higher motor fuel prices, but the most effective longer-term strategy would be to produce more crude oil domestically, Felmy maintained.
“The [Obama] administration understands that the rise in crude oil prices is driving gasoline price increases, but it hasn’t responded with favorable policies,” he said. “It has consistently held back oil and gas development onshore and offshore, and refused to approve the Keystone XL pipeline’s permit. We think Americans understand that producing more oil at home will improve our situation, and we’re encouraging them to express this as they vote later this year.”
Felmy’s Feb. 22 teleconference came a day after the US Energy Information Administration reported that US retail regular gasoline prices averaged $3.59/gal, 40¢ more than a year earlier, and the nationwide diesel fuel average price was $3.96/gal, 39¢ higher year-to-year. Prices were highest on the West Coast, driven by California specifications, followed by the East Coast than along the Gulf Coast and in the Midwest and Rocky Mountains.
Rising gasoline prices also have grown more political. “I am extremely concerned by recent reports that oil and gasoline prices continue to rise, and gas could reach an average of $4.25/gal by April,” Virginia Gov. Robert F. McDonnell (R) said on Feb. 21. “Even more than that, I am concerned that the Obama administration’s ongoing lack of a comprehensive energy policy leaves us vulnerable to continued future energy price spikes and uncertainty in this critical area.”
Citing antitrust concerns, Felmy declined to make any forecasts. He noted, however, that US refiners’ average acquisition costs have been driven more in recent months by Brent crude prices than those for West Texas Intermediate. Efforts also are under way to address a pipeline bottleneck at Cushing, Okla., which is limiting the flow of crude from Canada to US Gulf Coast refineries, he said.
Felmy said he was encouraged by the Obama administration’s Feb. 20 Gulf of Mexico transboundary agreement with Mexico, but added that it also should immediately approve the Keystone XL pipeline project’s permit, which would add another 700,000 b/d of supplies, and move forward with a more aggressive 5-year US Outer Continental Shelf program for 2012-17.
“If it showed that it was serious about increasing domestic supplies, markets would take notice,” he suggested. “At a minimum, it would encourage producers and provide more revenue for federal, state, and local governments.”
Contact Nick Snow at [email protected].
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.