CONCORD, N.H. -- A new study of gasoline markets in five Northeast states concludes more than 80% of the variation in average retail gasoline prices over recent years is due to variation in the average price of crude oil.
And with crude-oil prices reaching a new record high of $82.51 a barrel, the study offers new reasons for consumers to be concerned about future gasoline prices while perhaps reducing claims of price gouging by the retailers themselves.
New Hampshire Attorney General Kelly A. Ayotte released the Report [image-nocss] on Petroleum Markets in New Hampshire and other states in the northeastern United States this week.
The report, which examines gasoline and heating oil markets in Massachusetts, Maine, New Hampshire, Vermont and New York, was commissioned by the attorneys general of these states to provide an overview of market conditions specific to the region that may that affect prices of petroleum products sold there. Professor Justine Hastings of Yale University and ERS Group, an economic consulting firm, prepared the report for the northeastern states.
We undertook this study so that we would have a better understanding of how the market for these necessary commodities operates, Ayotte said. In the past, we have assumed that price fluctuations have been due to everything from seasonal usage changes to natural disasters such as the hurricanes of 2005.
Because we made this study, we now have factual information on how the market operates and will better be able to analyze what is behind these price changes. This will make it easier for us to determine when we may want to look more deeply into the causes for variations in the price of gasoline or home heating oil in New Hampshire. For example, the report states that in New Hampshire and the other states involved in the study, over 80% of the variation in prices of gasoline has been due to variations in the price of crude oil. This is a significant fact.
This report examines the source of gasoline and heating oil supplies in New Hampshire and the other states, as well as how gasoline and home heating oil are transported, stored at terminal facilities, and ultimately make their way to retail gas stations and heating oil distributors in the region. The report describes how the structure of this supply and distribution chain, involving wholesale and retail markets, influences the price consumers pay at the pump.
The report comes just as crude-oil prices reached new record levels, topping $82.50 a barrel for the first time ever yesterday.
Specific findings and conclusions of the report include:
Approximately 90% of the total consumption of petroleum products in the states studied is supplied by ships or barges. Refineries in the Mid-Atlantic, Midwestern and Gulf Coast regions of the United States provide a substantial portion of the refined petroleum products shipped by pipeline into New York.
According to recent data, New York has the greatest number of petroleum product distribution terminals with 107. In the other states in the study, there are 30 terminals located in Massachusetts, 14 in Maine, seven in New Hampshire and three in Vermont.
The price of crude oil is the single largest variable cost in the production of gasoline, accounting for approximately 55% of the retail price of gasoline. For the states studied in the report, over 80% of observed variation in average retail gasoline prices over recent years is explained by variation in the average price of crude oil.
Retail gasoline stations have different kinds of ownership structures, including stations owned and operated directly by the refiner; franchisees that operate a station leased from a refiner; and individual proprietors that purchase wholesale gasoline from refiners and are often supplied by jobbers that maintain relationships with multiple distribution racks. Jobber-supplied retail gasoline stations are the most prevalent. These stations share of retail volume ranges from just over 40% in New York to 97% in Vermont.
Hypermarkets such as BJs, Costco, and Sams Club have begun selling gasoline (typically, unbranded gasoline) with a focus on high volume and low margins, but such outlets currently have only nominal market shares in the states studied. Of branded gasoline, Mobil had the largest market shares in all five of the states. CITGO, Exxon, Sunoco and Shell also had relatively large market shares.
Click here to view the complete report.
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