High demand, consumption equal high gasoline prices
At a Premium
Drivers experiencing sticker shock at the pump shouldn't count on relief anytime soon, according to Lynn Pham, oil analyst for the Texas Comptroller of Public Accounts. Many factors affect the price of gasoline, including world events and plain old supply and demand, and all can combine to hike prices.
Threats of violence in the Middle East, damage from Hurricanes Katrina and Rita, refineries closing to retool equipment and a looming summer driving season are all factors that will keep gas prices high through summer 2006, Pham said.
"Prices will probably stay high through the summer unless people cut back on their driving, and that's not very likely since driving is still the cheapest way to travel and to go on vacation," Pham said.
In 2001, Texas drivers consumed 30.9 million gallons of gasoline per day, second only to California for U.S. consumption, according to the Energy Information Administration (EIA), an independent statistical agency within the U.S. Department of Energy.
With Texas drivers averaging nearly 18,000 miles per year per licensed driver, Texans log more miles per person than anyone else in the country, according to data from the EIA and the Environmental Protection Agency.
While Texas still tops the nation in domestic oil production, consumption heavily outweighs production. Texas' black gold rush peaked in 1972 with an annual production of 1.26 billion barrels of oil. Since then, production has declined steadily to its 2005 rate of 346 million barrels, Pham said.
To the tank
When tanker ships dock in Texas ports, some crude oil is put into pipelines and transferred to other parts of the country for refining, but the bulk of crude oil heads to Texas refineries, Pham said.
In 2005, Texas' 25 operating refineries processed 4.6 billion barrels of crude oil a day, more than any other state in the U.S., according to the EIA. Only about 45 percent of that total is made into gasoline, while the other 55 percent is used to create products such as diesel fuel and heating oil, jet fuel, heavy fuel oil and liquefied petroleum gas.
After oil is refined into gasoline and other products, distributors send it through the pipeline system to bulk storage terminals in other parts of the country that service various retail gas stations. Texans living close to port cities see some savings at the pump because the gasoline gets to the pump faster without using the pipeline system, Pham said.
While the cost of a barrel of oil has the most bearing on the cost of a gallon of gas, people at every step of the journey get a piece of the price. In April 2006, the average retail price for a gallon of gasoline was $2.74, according to the EIA. The price of crude oil made up 54 percent of the cost of a gallon of gas, while 26 percent went to refining costs and profits, 17 percent went to federal and state taxes and 3 percent went to distribution and marketing costs.
Supply and demand also affects the price of gas. When refineries shut down to repair and update equipment, there's less supply to meet the demand, and gas prices can soar. Refineries in the U.S. are operating at near maximum capacity and are finding it difficult to shutdown for routine maintenance, which can cause even more expensive shutdowns due to refinery fires, Pham said.
Houston-based Motiva Enterprises' expects to expand its Port Arthur refinery to more than double the plant's refining capacity, said Port Arthur Motiva spokeswoman Sue Parsley. The proposed expansion would increase production by 325,000 barrels of crude oil per day, making it the largest oil refinery in the U.S.
"The expansion would mean approximately 300 new permanent jobs and 3,000 to 4,000 contract jobs," Parsley said. "That's more than we've ever seen around this area."