LCC prof explains our lofty gas prices
Wednesday, October 5, 2005 8:34 AM PDT
By Courtney Sherwood
Printable version
E-mail this articleGas stations charge more for gas in Cowlitz County because it costs more to truck fuel in, and because they can get away with it, Lower Columbia College economics instructor Shon Kraley said Tuesday.
Gas prices doubled over two years, Kraley said during his "Taste of LCC" lecture, one of many half-hour talks presented by instructors at the school.
Taxes play a small role in rising prices, but the biggest factors are shrinking supply and rising demand, Kraley said.
As the supply of any commodity goes down, prices go up, Kraley said.
"The vast majority of oil supplies in the world are controlled by a tightly held oil cartel," the 11-member Organization of the Petroleum Exporting Countries, he said.
OPEC members cut production to drive up prices -- and new technologies have helped countries keep an even tighter leash on supply recently, Kraley said.
Add the war in Iraq and Hurricane Katrina, and oil supplies are down.
"If the price goes up, you typically can't afford it, and demand goes down," he said. But in the case of gasoline ... if the price goes up you can't decrease your demand very much."
Most drivers still want as much gas as they always did, and worldwide there are more drivers than ever, Kraley said. Just look at China.
"They're growing like mad," adding to the overall surge in demand for petroleum products, Kraley said.
With U.S. demand still strong, and demand abroad growing, gas is a hot commodity, Kraley said. "So we find the price going up, up, up."
Taxes also play a part. In 1981, Washington drivers paid 16 cents per gallon in state and federal tax. Today they pay 49 cents.
All these factors are responsible for today's all-time-high prices -- which averaged $2.89 per gallon statewide on Tuesday, according to a AAA survey.
So where does Cowlitz County fit in?
Prices here have gone up more than in some other places because we're far from Portland and Tacoma "rack stations" -- where fuel trucks load before they deliver gas to individual stations, Kraley said.
Those trucks are paying more than ever for the diesel they burn driving to local stations. The distributors pass on their extra costs by charging more for fuel.
"The big suppliers also have zonal pricing schemes," Kraley said, which seem to add a few cents at Cowlitz County pumps.
These schemes are based on both suppliers' costs and on what they can get away with, Kraley said.
And the schemes appear to be a few cents higher than the prices in Vancouver, he said. "Suppliers don't have to talk to each other about what they charge. They just see what their competitors are doing and charge what they can."
Past Month's Most Commented Stories