A little relief
June 13, 2001
Iowa has felt a brief reprieve in the price its residents pay for gasoline, but experts said energy conservation is crucial to long-term affordability.
David Downing, energy data analyst for the Department of Natural Resources, said gasoline prices tend to be higher on the coasts, but prices are currently higher in the Midwest.
“As of the fourth of June we have a Midwest average of $1.72 and a U.S. average of $1.63 for unleaded,” Downing said.
He said high prices in the Midwest can be chalked up to the major cities of the region, which are figured into the average.
“The average is boosted by areas like Chicago, St. Louis and Milwaukee,” Downing said.
Norm Olson, project manager of the Iowa Energy Center, said the recent expensive gasoline prices can be blamed on several things.
“Some of the reasons that are listed publicly are that the refineries were switching over from winter to summer formulas and there was a shortage of the summer formulas. Some of the refineries were at reduced capacity because they were having production problems,” he said. “But [the refineries] are making record profit, so I would say that they are evidently making a big difference in what they’re selling it for and what they’re producing it at.”
Downing said the construction of new refineries would be necessary in attaining affordable fuel. He said the high prices are due to a lack of refineries to meet demand, rather than price fixing by OPEC.
“[OPEC] does affect [prices] as far as crude oil, but the biggest thing now is refiners setting the prices, simply because no one is building new refineries,” he said.
Downing said more attention needs to be paid to production, rather than just obtaining the fuels.
“The one thing you have to remember is that drilling is not going to solve the problem. It’s only a small slice of it.” Downing said. “The demand for gasoline has gone up an average of 2 percent a year for the last decade. The refinery capacity has increased just slightly, but has basically remained stagnant.”
He said there are numerous difficulties in constructing refineries.
“Refinery capacity is restricted with a lot of environment regulations,” Downing said.
Besides concerns with the number of refineries, Downing said America’s poor practices of energy conservation are also cited as a reason for higher prices at the pump.
“We also have to address that for the past 20 years the mileage of the national fleet got better and that essentially is the reason that we had cheaper gas. Now all of a sudden we are driving sports utility vehicles that escape restrictions because they are classed as trucks,” said Downing. “Over the past two years the mileage of the national fleet has gone down.”
An increase in highway speeds nation wide has also contributed to more consumption of gasoline.
“The last study I saw showed that if you increase the speeds from 55 to 75 miles per hour, on average, the vehicles will lose 17 percent of their fuel efficiency,” Downing said. “A lot of states have increased their speed limits and people are driving a lot faster.”
Olson said solutions for lowering fuel costs could lie in the increased consumption of fuel additives, such as ethanol.
“Traditionally, the price of ethanol, or gasohol, at the pump has been lower than regular gasoline, although it does receive a government subsidy,” Olson said.
Future prices are difficult to predict, as they are subject to many different influences.
“You have to remember that gas is a commodity and is subject to demand like corn or soybeans,” Downing said. “Any little thing will obviously affect prices.”
Despite complaints from consumers, the prices at the pump still lag behind those paid during the energy crises of the 1970s and 1980s, Downing said.
“We’re still below, an example is in the 1980s. If you adjust that for inflation, we were paying $2.60 a gallon for gas,” he said.