Sup­ply ac­cel­er­ates, but gas prices stuck in neu­tral

The Washington Times Weekly - - National - BY STEPHEN DINAN

Amer­ica is in the midst of an en­ergy boom that has left the coun­try float­ing in crude oil and nat­u­ral gas — but con­sumers are see­ing only mod­est re­turns at the gas pump, where an­a­lysts said the chief ben­e­fit has been sta­bil­ity, not cost-cut­ting.

The co­nun­drum has con­sumers scratch­ing their heads and law­mak­ers on Capi­tol Hill promis­ing in­ves­ti­ga­tions, say­ing it stands con­ven­tional eco­nomic wis­dom on its head: More sup­ply should mean lower prices.

Crude oil and nat­u­ral gas sup­plies have risen dra­mat­i­cally in the past three years. In Oc­to­ber, the U.S. pro­duced more crude oil than it im­ported — a mile­stone last reached in 1995. Yet av­er­aged na­tion­wide, prices dropped 11 cents last year. GasBuddy, which tracks pump prices, projects a drop of only another dime this year, to av­er­age $3.39 a gal­lon.

“We’re not see­ing that it’s hav­ing a tremen­dous im­pact on the re­tail price of gas at the pump, but we do see that con­sumers are sav­ing. We saved a lit­tle bit of money in 2013, and we ex­pect con­sumers will save a lit­tle more this year,” said Gregg Laskoski, se­nior petroleum an­a­lyst at GasBuddy.

While cleaner-burn­ing en­gines, bet­ter elec­tric bat­ter­ies and al­ter­na­tive fu­els are gar­ner­ing in­creased at­ten­tion, most cars still burn gaso­line. Amer­i­cans are spend­ing a higher per­cent­age of their in­come on fill­ing their tanks than they have since the early 1980s.

What con­sumers are see­ing since the oil boom be­gan in earnest is bet­ter sta­bil­ity, an­a­lysts said — a re­li­able do­mes­tic sup­ply trans­lates into ca­pac­ity to han­dle prob­lems, which means more sta­bil­ity.

“There’s a lot less vo­latil­ity,” said Michael Green, a spokesman for AAA, who said the spikes are eas­ing. Two years ago, the av­er­age price peaked at $3.94 a gal­lon, while last year it peaked at $3.79.

Still, the dis­con­nect be­tween higher pro­duc­tion and price stag­na­tion is tough for some con­sumers to rec­on­cile, and law­mak­ers on Capi­tol Hill have de­manded an ex­pla­na­tion.

“I just am trou­bled with the ba­sic propo­si­tion that re­ally ques­tions what we’ve been told around here, and that is when you have new oil sup­plies, the con­sumer at the pump is sup­posed to ben­e­fit,” Sen. Ron Wy­den, Oregon Demo­crat and chair­man of the Se­nate En­ergy and Nat­u­ral Re­sources Com­mit­tee, de­manded to know at a hear­ing last year. “We’re not see­ing that in too many in­stances.”

An­thony Swift, who works at the Nat­u­ral Re­sources De­fense Coun­cil, an en­vi­ron­men­tal pres­sure group, said he doesn’t see the ex­tra crude sup­ply re­flected much, if at all, in gas prices.

In­stead, he said, the big­gest ben­e­fit to con­sumers has been un­der the car hood, where ef­fi­ciency is im­prov­ing.

Driven in part by fed­eral and state man­dates, ve­hi­cles are mak­ing ma­jor leaps in the num­ber of miles they can go per gal­lon of gaso­line con­sumed. Over­all, that means con­sumers have been us­ing 600,000 fewer bar­rels of gaso­line a day since 2007.

“Con­sumers are able to drive more us­ing less gas thanks to auto ef­fi­ciency stan­dards,” he said. “If you look at the lat­est data from the En­ergy In­for­ma­tion Ad­min­is­tra­tion, it’s clear that while grow­ing oil pro­duc­tion hasn’t helped con­sumers at the pump, stronger ef­fi­ciency has.”

But con­tro­versy has come with the man­dates — par­tic­u­larly the Re­new­able Fuel Stan­dard, which pushes for cleaner-en­ergy prod­ucts such as corn-based ethanol to be blended into gaso­line.

Ethanol now makes up about 10 per­cent of mo­tor ve­hi­cle fuel, and prob­lems get­ting it from the Mid­west to re­finer­ies on the East, West and Gulf Coasts can cause spikes — like the 26-cent jump last spring.

“To­day, the most im­por­tant thing that’s af­fect­ing us is the re­new­able fuel stan­dard,” Bill Kleese, chair­man and CEO of Valero En­ergy Corp., told Mr. Wy­den and his Se­nate com­mit­tee last year. “The [Re­new­able Fuel Stan­dard] must be fixed. This cost is just sky­rock­et­ing.”

Congress is likely to wres­tle with that ques­tion over the next few years, as well as with other green-en­ergy in­cen­tives.

As for the gaso­line mar­ket, the fu­ture is hard to project be­cause of the many vari­ables, in­clud­ing what OPEC lead­ers will do at a meet­ing in June. An­a­lysts ex­pect some of them to try to cut pro­duc­tion.

But from the U.S. stand­point, the sup­ply will be there. The ques­tion is whether the rest of an ag­ing net­work can process it.

“There’s rea­son to be­lieve this could be a sus­tain­able trend be­cause we have just an abun­dance of do­mes­tic pro­duc­tion, but at the same time we need a lot of in­fra­struc­ture to catch up,” Mr. Laskoski said.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.