Understanding current gas prices
Understanding gas prices is not as simple as the general assumption that somewhere in corporate America , a “Wizzard of Oz” type increases and decreases prices as he wishes. There are other factors that are contributing to this latest price increase.
MTBE
“Methyl tertiary butyl ether — an octane booster and oxygenate used for gasoline blending (more on MTBE on Wikipedia).
Studies have shown that the usage of this booster is very harmful to the environment which explains the many lawsuits against those that use it. Here is an excerpt of a USA Today article that further explains:
Gasoline prices will be unusually high and shortages might occur this summer, because the U.S. ethanol industry can’t keep up with the demand for fuel-grade alcohol to mix with gasoline, the head of the U.S. Energy Information Administration told a Senate committee Wednesday.
Merely “short-term challenges,” countered Bob Dinneen, president of the Renewable Fuels Association, the ethanol trade group. Whatever can’t be produced here can be imported, he said.
But imported ethanol, mostly from Brazil, carries a 54-cents-per-gallon tariff that would boost fuel prices even more, unless it were waived.ÂÂ
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Refiners have used MTBE for years and now are discontinuing it because MTBE can taint water supplies and Congress has refused to protect them from MTBE lawsuits. Ethanol is the only ready substitute.
Dinneen pointed out that 33 ethanol plants are under construction and that some of the 97 others already producing are being expanded.
But EIA, in a report last month warning of shortages, said that “new (ethanol) facilities will not start soon enough to meet 2006 demand.” That, EIA head Guy Caruso told the committee, “could cause temporary supply dislocations and may cause price volatility.”
Ethanol mainly is made in the Midwest. But demand should be heaviest in the Northeast and Texas because of special clean-air fuel requirements there. Shipping alcohol costs more and takes longer because ethanol attaches to any moisture present and could contaminate petroleum pipelines  the cheap, fast way to ship.” (more…)
Here is a graphic that gives you and idea of how what you pay at the pump is divided amongst suppliers.
I found this image on a website that further explains why gas prices fluctuate (click here for the source).
I know that this information does not have as much “sex-appeal” as pointing to white oil execs as the blame for potential $4.00/gallon gas, but does present a very clear and cohesive explanation. Sorry, but fuel here in the US would not have gone up if the sole reason for going to Iraq was to fill our cars with cheap gas.
April 21st, 2006 at 10:28 am
There is a new book Called “the Long Emergency” that discusses the author’s vision of the future of oil. It’s perhaps a little extreme but very, very, thought provoking.
April 21st, 2006 at 10:35 am
Glad I am a stay at home mother. Don’t have to drive unless I want to. And at 3.05 a gallon I don’t want to.
April 21st, 2006 at 12:20 pm
I’ll be sure to leave room for the “It’s Bush and his cronies fault. All corporate greed.” comments.
In the meantime, the ethonol is a concern. Lawdy, lawdy, they be ripping up watermelon fields to plant corn.
What an outstanding graphic, by the way. I suppose the refining cost increase is a direct result of Katina. The crude prices (I’ve always loved the term “light, sweet crude”) reflect the increased demand in China and India.
It’s time Congress REALLY addresses alternative sources.
April 21st, 2006 at 1:43 pm
The “peak oil” concern is that half of the world’s oil has been used. The oil that was most easily obtained was taken first, leaving behind the more difficult to extract oil. This situation, along with higher usage, guarantees ever higher prices……
It is possible for life to go on with more expensive gas. I live part time outside of the USA where the price of gas is currently $1.15 per liter ($4.35 per gallon). It really helps to see the price expressed in liters rather than gallons.
April 21st, 2006 at 1:48 pm
I think we are over using the earths natural resources speeding up the demise of the human race. Can anyone say What happened to the dinosaurs ? extinction . And we are ever flirting with our own…
April 21st, 2006 at 6:08 pm
I say shut down NASA and tell that wonderful think tank of scientists that there will be absolutely no further trips to space until they come up with a viable alternative to the internal cumbstible engine. Hydrogen power anyone?
April 21st, 2006 at 10:02 pm
I’m with you on that one Jeff.
April 23rd, 2006 at 4:45 pm
Blah! Blah! Blah! I’m still going to keep cursing Bush and his Rich White Oil Tycoons everytime I have to pay $60 to fill up my SUV. They’re probably the blame for the ethanol shortage and they’re the easiest to scapegoat!
April 23rd, 2006 at 6:48 pm
Our gas has gone from $1.15 ($4.35 per gallon) per liter on the 23rd of April to $1.22 ($4.62 per gallon) today. I have heard that gas in Turkey is $8.00 per gallon! …..Perhaps the NASA people should look for oil on Mars.
April 24th, 2006 at 10:53 pm
I think a hydrogen power coupled with an electric motor would be ideal. Just wait for Toyota to come out with it.
May 5th, 2006 at 11:43 am
The more I try to understand gas prices the more I am covinced that those folks who have fought the building of new refineries, the exploration and drilling for oil anywhere off the coast or in Alaska have in an environment of increasing world demand for oil are, in fact, responsible for the situation that we know are in. Those are same the folks seem to blame the “evil” oil companies and George Busch and his “oil crownies” choosing to demagogue this issue for political gain. This only works on the uneducated. Unfortunately, there are alot of such people.