The weeks leading to the start of spring ushered in more than just warmer weather: they also saw a steep rise in the price of gas. Though President Obama’s State of the Union address pointed out that the U.S. is producing more oil on its own shores than it has in 15 years, the cost of filling up is still an issue yet to be resolved.
So what’s causing gas stations to charge an additional 45 cents at the pump? According to analysis by the Energy Information Administration, approximately 2/3 of the price increases in gas since the start of the New Year can be attributed to what’s known as a “crack spread,” which is a measure of refinery profit margins. What this means is that American oil refiners who “crack” crude oil into gas are the party responsible for the current cost of the fuel for our cars.
Of course, the cost of crude oil and the taxes placed upon it account for part of the refinery’s mark-up. But other contributing factors include:
- Maintenance outages that are necessary to continue safe operations but that decrease capacity has led to less productivity, fueling the need for mark-ups
- Regional refinery limitations and restrictions on transporting refined gasoline between oil creates price discrepancies in different areas
- The transition from winter grade to summer grade products required to meet U.S. emissions standards and the minimal profit margin for refiners also creates incentive for increased prices
Proposed solutions to what seems to be the ongoing issue of high prices at the pump involve setting up a reliable reserve of processed gasoline to access in times of crisis.
We’ll be watching the cost of fueling up and reporting on any additional news related to the increased price.
CQI Associates is an energy and sustainability management consulting firm servicing residential and commercial clients throughout the United States. To learn more, please contact CQI Associates by calling 410-740-0667 or visit CQIAssociates.com today!