Who sets the price?

“I know they’re trying to blame it on the Hurricane,” said Yuba College student Jasmine Wright, frustrated with the rising cost of gasoline, “but I think (gas prices) would have gone up regardless.” Wright is not alone in her frustration with the escalating prices. Students with limited budgets and who commute to the Marysville campus from as far away as Woodland are collectively feeling the pangs of empty gas tanks and emptier wallets.

“It affects me a lot,” continued Wright. “I live on base and have to drive 20 minutes to school every day.”

High gas prices have been blamed on everything from the war in Iraq to Hurricane Katrina. But who or what is really to blame for the escalating costs of gasoline in California?

The California Energy Commission reports that the state derives 64 percent of its crude oil from domestic sources, 42 percent of that coming from our own state, the fourth largest oil producing state in the country. According to CEC, out of all the crude oil the state receives, we refine 90 percent of it ourselves. Only 6 percent of the total crude oil imports come from Iraq. Canada and Mexico are the largest importers.

With most of California’s oil coming from domestic sources, and most of that coming from California itself, why then the sudden hike in gas prices over the last year, and especially this last month?

CEC, on its government-sponsored website www.energy.ca.gov, claims that there are four factors which determine the cost of gasoline. The first factor is crude oil prices, which are derived from the world price, and supply and demand. Since the beginning of 2005, the price of crude oil worldwide has jumped more than $26 dollars a barrel. Since there are 42 gallons in a barrel, this turns into a per gallon increase of 66 cents for crude oil since the beginning of the year. Retail prices by August 8, 2005, had increased 62 cents per gallon, nearly the same amount.

The second factor contributing to escalating gas prices is taxes. Taxes for gasoline in California are 18.4 cents per gallon for federal excise taxes; 18 cents per gallon for state excise taxes; and then additional costs for local and state sales taxes. Sales taxes depend on the city and county. On average, the sales tax is between 9 and 20 cents per gallon of gasoline.

The refiner’s and dealer’s costs and profit margin of distributing and retailing are the third and fourth factors contributing to high gas prices. For California, refining costs are higher due to stricter regulations regarding how clean the gas burns. California gas burns in a vehicle’s tank with an additive called ethanol, which is more costly than MTBE, the additive of choice in most of the rest of the country. Before local retailers even have their hands on the gasoline, most of the cost has been passed down to them by what they pay wholesale. The retailer must adjust the price for whatever he or she has to pay for it.

In September of 1996, gasoline cost an average of $1.28 per gallon in California. Adjusted for inflation, that would be $1.60 per gallon today. At $3 per gallon, gasoline prices in California have thus exceeded the Consumer Price Index by 87.5 percent over the last nine years. Although we may be not have reached the historical statewide high price in March 1981, which would be $3.08 adjusted for inflation, we came pretty close statewide, and certainly exceeded it in some cities.

So who is the culprit for this increase? Well it depends on who you want to blame. Yuba College student Shawn Hamby, who says he drives a lot less and bikes a lot more as a result of rising gas prices, thinks that the entire market has caused the problem.

“It’s the consumers, because we consume far too much gasoline. It’s the speculators and the producers that are not releasing the proper amounts of gasoline. And it’s also the fact that right now we have merging nations, such as India and China, which are using vaster amounts of oil than they used before,” said Hamby. “This is creating another distribution problem. So it’s a global problem. There is no single person to blame.”

California is the number one consumer of gasoline in the nation, but prices are going up everywhere, not just here. So there may be another reason.

The California Attorney General and federal authorities are investigating rumors of alleged price fixing among the oil companies. The trouble is that even if Californians wanted the government to set prices, they couldn’t. Ronald Reagan, during his presidency removed regulations on oil companies and petroleum prices. Currently, there is no government control on the price of oil or gasoline. As a result, the most that the oil companies would receive as punishment, if the allegations were true, would be a fine.

Those concerned with gas prices may seek information and driving tips from the web site http://www.consumerenergycenter.org/transportation/conventional/tips.html. Some tips include making sure that your car’s air filter is clean, carpooling and keeping your tires properly inflated. You should avoid topping off your tank, speeding and excessive stopping

As the weather cools down, you should turn off the air conditioner as well. Regular maintenance can also increase your fuel efficiency, some estimate by as much as 13 percent.