Study finds no illegal activity in state's gasoline prices

A major investigation into the price of gasoline in Washington state uncovered no illegal activity, and discrepancies were explained by differences in wholesale gas prices, according to a report released today by the Washington Attorney General's Office.

The $161,00 study, done by University of Washington economist Keith Leffler, found the range between the highest and lowest wholesale gas price in the state was 3.4 cents per gallon.

"Competition can be particularly influenced by the number of hypermarketers, which are large retailers such as Costco, Wal-Mart and Safeway, that sell gas in the market area," the study found. "Other contributing factors include wages paid to station attendants, property values and the number of vehicles per station."

The study, the second of two parts commissioned by the AG's office, focused on retail and wholesale gas-price data and included comments generated in a series of public meetings. It found that Washington drivers have actually used less gas over the past five years.

The first part of the study, released in August, found that gas prices varied widely throughout the state, with the most expensive place to buy a gallon of gas in Bellingham; the lowest, Spokane County.

"We're importing higher-priced refined gasoline to meet consumer demand, which raises average prices at the pump," Attorney General Rob McKenna said in a prepared statement today. "Any glitches in the supply system can cause significant price spikes. Meanwhile, crude oil costs nearly four times as it did five years ago."

The last comprehensive study on Washington gas prices was published in July 1991. The new 71-page report found that gas prices have doubled since May 2003 and that gas and crude oil prices are at an all-time high. It found that from June 2000 to June 2001, retail gasoline prices varied by 11 cents; from February 2007 to September 2007, prices varied by 91 cents.

Today, according to AAA, the average price of gas in the state is $3.60. It ranges from a high of $3.66 a gallon in Bellingham to a low of $3.54 in Vancouver.

The report found that the nature and extent of competition is a major factor in explaining price differences, but Bellingham was the only city in which prices were not well-explained. It has below-average wholesale prices and above-average retail prices. The report said its consistently higher prices may be due to its proximity to Canada, which has much higher gas prices.

In other findings:

• Crude oil costs increased by more than 76.5 percent from December 2003 to May 2007. Since then, the cost of crude has risen an additional 93 cents a gallon and on March 13 reached an all-time high of more than $110 per barrel.

• The cost of crude accounted for about 39 percent of the price of a gallon of gas in May 2007, compared to 62 percent last December.

• The amount of gas consumed by Washington drivers decreased by 1 percent between 2003 and 2007. However, over the same period, diesel consumption increased by 31 percent, in part because of the large growth in container traffic to the ports of Seattle and Tacoma. A year ago, the average price of diesel fuel in the state was $2.90 a gallon; today, the average price is $4 a gallon.

• Washington has the highest gas tax in the nation. The combined federal and state tax is 54.4 cents a gallon. Gas prices, as of February, were the sixth highest in the nation. Unlike most states, Washington depends almost exclusively on the gas tax, as opposed to general tax revenue, to fund state highway maintenance and construction.

• Washington's five refineries are running at capacity, but do not produce enough gasoline to supply the demands of the region, which has led to substantial increases in the importation of more expensive foreign gas.

Meanwhile, the environmental organization Sightline Institute released its own report that found Northwest residents have cut back on per capita gasoline consumption by 11 percent from 1999 to 2007, or nearly a gallon a week. During that time, weekly gas sales in the Northwest declined from 8.7 gallons per person to 7.8 gallons, Sightline found.

"In the face of higher prices, we're taking steps to downshift our gasoline consumption, and it's paying off," said Clark Williams-Derry, Sightline research director. "This is good news for the climate, our health and for our pocketbooks."

Susan Gilmore: 206-464-2054 or sgilmore@seattletimes.com