Why the Puget Sound area pays more at the pump

Shock. Anger. Frustration. Resignation. We all have been through the stages of gas-price grief, especially as prices have clicked toward $3 a gallon. What's a consumer to do? Be informed. Here are the facts about gas pricing, along with tips for saving money.

By Luke Timmerman
Seattle Times staff reporter

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Location of supplies. Most gasoline refining is clustered in the southeastern United States, so stations there have access to ample supplies. In Washington, there are just four major refineries — two in Ferndale, Whatcom County, and two in Anacortes, Skagit County — that control almost all the regional production of gasoline. Other refineries that could supply the region during a shortage are far away, meaning it would be expensive and time-consuming to ship here, and therefore unlikely they would supply the market.

Lack of local competition. A series of oil-industry mergers has reduced competition by concentrating control of oil and gas in the hands of fewer companies. In 1981, seven oil companies controlled 72 percent of the retail market in the area, leaving the rest to independents. By 1998, four companies controlled 94 percent of the stations, and four refineries controlled nearly the entire supply to retail stations, according to Auto United Trades Organization, a group of independent stations in Washington. The oil companies acknowledge that greater competition at the wholesale and retail level reduces prices.

Zone pricing. Oil companies use computer formulas to dictate different wholesale prices among neighborhoods under a practice called "zone pricing." The process is secret, but retail-station owners say the price they pay appears to be based on a variety of factors — location of the station, neighborhood affluence, proximity of competitors, and customers' willingness to pay. The difference in zone pricing is the reason the same refined gas from Anacortes costs more in Seattle's Magnolia neighborhood than in Issaquah. The Federal Trade Commission has investigated the practice, but found it does not violate antitrust law because it could not show collusion among the oil companies.

Disruptions in supply. Explosions or routine maintenance at refineries can reduce local supplies. A breakdown in the transportation network — such as a pipeline rupture — can also reduce supplies and therefore result in higher prices.

Environmental specifications. Gasoline reformulation to reduce emissions can slightly increase the cost of production. California had supply interruptions last summer as refineries changed procedures to remove a common additive. Gasoline for consumption in Washington does not have to be reformulated.

Operating costs. Gas stations have different traffic patterns, rents and labor costs that affect the cost of doing business.

Taxes. Washington's gas tax is a uniform 28 cents per gallon statewide, which ranks ninth in the country. The average state gas tax is 24.3 cents per gallon.

— Sources: Energy Information Administration (EIA); Auto United Trades Organization, American Petroleum Institute (API)

The big picture: Why prices fluctuate

	SAMIR MEZBAN / AP An Iraqi firefighter stops for noon prayers while battling an oil-pipeline blaze near the northern town of Beiji last September. Political instability, accidents and OPEC policies can disrupt oil supplies, raising prices at the gas pump.

Rising crude-oil prices and restricted supplies are reasons. Here are other factors:

OPEC: The international organization can cut oil production.

Political instability: Unstable situations in nations that produce a lot of oil, such as Venezuela and Iraq, can cause uncertainty in the global marketplace.

Global demand: The more demand for crude oil, the higher the price. Demand is particularly high in the United States, where the rate of economic growth continues to rise, and in China, where crude-oil imports increased 30 percent in 2003.

New fuel specifications: Exporters outside the United States who have not changed their gasoline to meet U.S. standards may try to sell their gas to other nations, meaning decreased supply for the United States. Plus, U.S. standards require big investment.

Costly distribution: When the cost of delivering gas rises, so does the price.

Political pressure: It is increasingly difficult for oil refiners to find new spots for refineries, pipelines and other facilities.

Seasonal demand: Summer is peak driving season, especially in the United States. Even when crude-oil prices remain relatively stable, the higher demand for vacation trips can spark gasoline price increases.

Lack of options: According to the EIA, the prices of basic energy sources — gasoline, natural gas and electricity — fluctuate more than those of other commodities because it is more difficult to find substitutes for energy sources. If the price of a food product goes up, a consumer can substitute something else, but alternative fuels aren't as readily available.

Sources: API; EIA

By the gallon: Where your money goes

Crude oil. The price of crude oil is influenced by the relationship between supply and demand. When consumption outpaces production, prices rise.

Taxes. May include federal, state and city.

Refining. Crude oil must be refined before it can be used by motorists.

Distribution and marketing. It costs money to distribute and market products. These costs are passed along to consumers.

Do it yourself: How to save money

Proper vehicle maintenance. Stick to a recommended grade of motor oil. Keep tires properly inflated. Keep the air filter clean — a clogged air filter can increase fuel consumption by up to 10 percent.

Minimize idling. Canada's Office of Energy Efficiency says 10 seconds of idling uses more fuel than restarting the engine.

Use cruise control. This helps a car maintain a steady speed and reduces gas consumption.

Use air-conditioning sparingly. But open windows can increase drag on the car and force the engine to burn more gas.

Lighten the load. Don't pile too much in or on your car. Remove unused roof racks.

Be wary of gas-saving devices. The Environmental Protection Agency has evaluated or tested more than 100 alleged gas-saving devices and found no product that significantly improves gas mileage.

Helpful, informative Web sites

• www.fuelcostcalculator.com/

• www.fueleconomy.gov/feg/drive.shtml

• www.ftc.gov/bcp/conline/pubs/alerts/fuelalrt.htm

• www.bankrate.com/brm/calc/gasPrice.asp

• www.GasBuddy.com

Sources: The Alliance to Save Energy, "Kelley Blue Book," U.S. Department of Energy

What to drive: Fuel-efficient vehicles

Most efficient vehicle overall: Honda Insight
60 miles per gallon city, 66 highway.
Annual fuel cost: $415.

Compact car: Honda Civic Hybrid (automatic)
47 mpg city, 48 highway.
Annual fuel cost: $543.

Midsize car: Toyota Prius (hybrid, automatic)
60 mpg city, 51 highway.
Annual fuel cost: $475.

Large car: Chevrolet Malibu Maxx (automatic)
22 mpg city, 30 highway.
Annual fuel cost: $1,088.

Sport-utility vehicle: Toyota RAV4 (manual)
24 mpg city, 30 highway.
Annual fuel cost: $1,005.

Pickup: Ford Ranger 2WD (manual)
24 mpg city, 29 highway.
Annual fuel cost: $1,005.

Minivan: Chrysler Voyager / Town & Country 2WD
20 mpg city, 26 highway.
Annual fuel cost: $1,188.

Source: www.fueleconomy.gov

Seattle Times news services contributed to this report.

Copyright © 2004 The Seattle Times Company

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