Washington residents pay more for gasoline than most people in the country. But why?
For years, Washingtonians have paid a premium at the pump.
Despite having five oil refineries in the Puget Sound area, the state has recorded some of the highest gasoline prices in the country.
And for much of the past decade, the disparity has grown, according to a Seattle Times analysis of retail pump prices compiled by AAA.
From 2017 to 2021, the average cost of a gallon of regular gasoline in Washington was 45 cents higher than the national average. That difference, or gap, is nearly double the 2011-2016 average of 24 cents, according to the analysis, which is adjusted for state gasoline tax increases.
For most of March and April, the gap widened as gas prices in Washington soared following the Russian invasion of Ukraine. He then shrunk. But on May 5, the average price of $4.75 for a gallon of regular gasoline in Washington was still nearly 39 cents above the national average. That price was also $1.26 higher than Washington’s average regular gallon on this date a year ago, according to AAA data.
Soaring gasoline prices have helped supercharge Washington’s already strong demand for electric vehicles, in a state with some of the lowest electricity costs in the nation. Those prices also prompted Sen. Maria Cantwell, D-Wash., to draft a bill, expected to be introduced in the Senate this month, that would provide more price information to federal regulators for market oversight. .
In recent weeks, the cheapest gas in the state has been found in eastern Washington, where stations tap into a network of pipelines that can bring gas from refineries in Montana and Utah. On May 5, sparsely populated Asotin County, which borders Idaho, had the best gasoline deal in the state, with an average regular price of $4.33.
The state’s most expensive gas has been marketed in the Puget Sound region and several other areas west of the Cascades that are largely supplied by the state’s own refineries. In King County on May 5, the average regular gasoline price topped $4.91.
For Washington truckers and other diesel users, prices have also skyrocketed. But as of May 5, the gap between the price paid in Washington and the rest of the country had narrowed to 5 cents when adjusted for taxes, according to The Times’ analysis of AAA data.
The retail prices paid by motorists are the result of a combination of factors that include world crude oil prices, the wholesale prices of gas produced by refineries and the more or less significant margins taken by retailers.
Washington’s five refineries are located in Skagit, Whatcom and Pierce counties. They process crude from the North Slope of Alaska and other sources, including oil from Alberta, North Dakota and overseas. Along with those in California, these refineries support West Coast fuel markets that are largely cut off from the pipeline networks supplying other parts of the country.
Market forces and monitoring
Some oil industry analysts and officials say the premium Washingtonians are paying for regular gasoline reflects a greater imbalance between demand and supply along the West Coast. They say the gas supply has been cut short in part because of the closure of several California refineries.
“If I take the population of the states that border the Pacific Ocean and look at the refining capacity, there’s no question that those markets are tighter than they were before,” said Tom Kloza, chief executive. world of energy analysis for oil. Price Information Service, a Dow Jones company that collects fuel price information for many customers, including AAA.
“It always comes down to market forces and the choices consumers make when selecting which stations to buy fuel from,” said Kevin Slagel of the Western States Petroleum Association.
But higher fuel costs in Washington, Oregon and California have long prompted government scrutiny.
Some oversight has come from the states.
The Washington Attorney General’s Office is monitoring gasoline markets, releasing a gasoline quarterly report which notes that producers and retailers are free to charge whatever price they choose for their product as long as they do not agree or engage in unfair or deceptive practices. As early as 1977, the bureau alleged that oil companies were fixing prices and artificially creating product shortages. The ensuing 15-year legal battle resulted in a settlement of more than $150 million. Since then, this office has launched further investigations and challenged certain oil company acquisitions due to antitrust concerns.
In 2019, the California Energy Commission, at the request of Governor Gavin Newsom, conducted an investigation into high gas prices in the state. The committee concluded in a report that prices had climbed as retailers increased their margins above the national average, including higher-priced brands that increased margins “well beyond competitors”.
“The overall increase in retail margins in California, greater than the rest of the United States, led California gasoline consumers to pay approximately $1.5 billion more in 2018 and $11.6 billion in over the past five years,” the report said.
In Congress, the spring 2022 price spike spurred a request on April 5 for a Federal Trade Commission investigation of West Coast gas prices by Sens. Maria Cantwell, D-Wa., Ron Wyden, D-Ore., and Dianne Feinstein, D-Calif. fundamentals of supply and demand.
This month, Cantwell plans to introduce legislation, co-sponsored by Wyden and Feinstein, that aims to increase transparency in transportation fuels markets. The bill would direct the Energy Information Administration to collect more detailed information and further disclose the price of these fuels. It would also create a new unit within the FTC to monitor the markets to increase oversight of manipulation or unfair competitive methods used to increase profits. It would also double the maximum penalties to $2 million a day for each offence.
“How do we shine the light on the black box to expose any anti-competitive black commerce, making sure there isn’t a group of smart guys in the room hurting consumers because they think we don’t can’t understand what happens when there is a lack of transparency? Cantwell said, chairman of the Senate Committee on Commerce, Science and Transportation, during a hearing on April 5.
Kloza, in an interview, said that his company, OPIalready ensures transparency by publishing the wholesale and retail prices obtained through its communication network.
But Robert McCullough, a Portland-based economist who testified at the April 5 Senate hearing, called U.S. oil and gasoline markets “less transparent than almost any other commodity.” McCullough is an expert witness for plaintiffs in a California antitrust lawsuit over gasoline prices. And in his testimony in the Senate, he called for more federal reporting on oil and gas transactions, which he said is “key to discouraging anomalous trading.”
The bill received a chilling reception from oil industry officials.
“Using the power of the FTC to undertake political investigations of US energy companies will not lower gas prices one penny. Energy prices are determined by supply and demand, not by false ‘price gouging’ accusations driven by the upcoming election rather than the facts,” said Anne Bradbury, CEO of the American Exploration & Production Council.
In a statement released earlier this month, Frank Macchiarola, senior vice president of the American Petroleum Institute, said “Americans are looking for solutions, not political posturing,” and that pump prices are a function of of “increasing demand and lagging supply combined with geopolitical unrest”. and Washington’s political uncertainty.
The pinch of the electric vehicle
Gasoline prices are rising as automakers launch a major shift to electric vehicles.
In the Puget Sound area, electric car dealerships are reporting that demand for vehicles far exceeds available supply, which has been severely reduced by supply chain disruptions.
Tommy Thoensen, general manager of Lee Johnson Nissan of Kirkland, said all electric Leafs were pre-sold before arriving at the dealership. Nissan has not kept up with demand as it becomes increasingly difficult to get parts out of China, he said.
“We have 15 coming this month, all sold out. Only one in June and one in July,” Thoensen said. “If I could get an unlimited supply, I could probably sell 60 a month.”
In Washington, fuel for vehicles is produced by public utilities subject to very significant price constraints.
More than half of the state’s electricity is generated by utilities, such as Seattle City Light. They should be based on the actual costs of providing electricity, including investments in operations, capital improvements and debt service.
Electricity is also generated by private regulated utilities such as Puget Sound Energy. These utilities must submit their rates for approval to the Washington State Utilities and Transportation Commission, which is tasked by the legislature with ensuring that customers get “reasonable rates” and that businesses realize a fair profit.
The prices of fast-charging stations, such as those operated by Tesla or Electrify America, are not subject to state regulation. But as long as electric car owners charge at home or at a charging station installed by a utility, prices reflect those of a nonprofit or regulated utility.
The federal Department of Energy calculates the cost of an “eGallon,” comparing the average cost of powering an electric vehicle in Washington to that of a similar gasoline-powered vehicle. Washington’s eGallon cost, last updated in March 2021, was 81 cents compared to an average national eGallon cost of $1.16.
Tonia Buell, a Washington State Department of Transportation official who is helping develop a network of rapid mapping stations on the West Coast, said electric vehicles also have lower maintenance costs.
“Now is a great time to buy an electric car – if you can find one,” Buell said.
For the vast majority of Washington motorists tied to petroleum fuels, the price drop isn’t expected anytime soon. Proposed EU sanctions on Russian crude have helped send US oil prices above $1.10 a gallon – and gas prices are expected to continue rising.