Gas study finds nothing illegal in soaring 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 Thursday by the state Attorney General's Office.

The $161,000 study, 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 cut their gas use over the past five years.

"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 Thursday. "Any glitches in the supply system can cause significant price spikes. Meanwhile, crude oil costs nearly four times as much as it did five years ago."

The last comprehensive study on Washington gas prices was published in July 1991.

The new 67-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.

Thursday, according to AAA, the average price of gas in the state was nearly $3.60. It ranged 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. Canadian drivers are crossing the border to fill up.

And, as McKenna pointed out, "It's not illegal to make a profit."

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 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. Leffler said Washington has the fifth-highest diesel price in the nation.

• Washington has the highest gas tax in the nation. The combined federal and state tax is 54.4 cents a gallon. 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.

Will spiraling gas prices cause people to park their cars? Perhaps over time, said Leffler, who pointed out that Washington now has the highest price of gas in history.

"We need this sword in our sides to change our behavior."

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