FTC Report on Gasoline Prices:

The FTC has released its report on gasoline prices. The Press Release and link to the report (as well as Comm. Liebowitz's concurring statement) can be found here.

From the Press Release:

One of the Report's conclusions is that over the past 20 years, changes in the price of crude oil have led to 85 percent of the changes in the retail price of gasoline in the U.S., while other important factors have included increasing demand, supply restrictions, and federal, state, and local regulations such as "clean fuel" requirements and taxes.

Some interesting findings in the report(my idiosyncratic list of things I found interesting, there's a lot more in the report):

1. Increased demand for world oil supplies, especially as the result of rapid economic growth in India and China, have dramatically increased the demand for crude oil. Crude oil prices are 85% of the cost of gasoline. World demand for other raw materials that form the basis for expanded growth in developing economies, such as steel and lumber, has also risen.

2. For most of the past twenty years real average annual gasoline prices, including taxes, have been lower than for any time since 1919.

3. In some situations, environmental regulations that require the use of boutique fuels lead to increased price variability, especially in California.

4. The presence of "Hypermarket" sellers of gasoline in a market, such as Wal-Mart and Safeway, tend to reduce prices because of their lower costs.

5. In 2004, the average state sales tax on gasoline was $0.225 per gallon which increases the cost of gasoline (duh).

6. Bans on self-service sales, such as in New Jersey and Oregon, increase prices (duh again).

7. Bans on so-called "below cost" sales of gasoline appear to raise gasoline prices by chilling competition. (I commented on Maryland's vigilance in protecting its citizens from low gas prices some time ago).

The whole report is long, but well worth reading for anyone interested in this issue.

More On Gas Prices:

Last week I discussed the important new FTC Report that was released studying the causes of high gas prices. One of the factors discussed at length there was that of wide variance in fuel standards across the country, which creates varying fuel reformulation mixtures for different regions of the country. These different fuel standards can thus increase the variability of gasoline prices by making it more difficult to redirect gasoline from one part of the country to another to in response to local supply and demand shocks. Thus, these differences in local environmental regulations can lead to higher local gas prices by reducing market flexibility.

Andrew Samwick of Vox Baby points to this nifty map supplied by economist James Hamilton that shows the many different standards in place across the country. Each of these subregions requires a different gasoline blend from each of the others, thereby chopping up the country into dozens of isolated mini-markets.

Note that the discussion that goes along with the map was posted on June 20, prior to the release of the FTC Report last week. In the post, Professor Hamilton directs a skeptical eyebrow at the GAO's conclusion that higher prices could be attributed in part to reduced competition from a supposedly overly-lax merger policy. As Professor Hamilton would not be surprised to learn, I'm sure, the FTC Report quite persuasively supports his raised eyebrow.

More on Boutique Fuels and Gas Prices:

Great discussion by Lynne Kiesling analyzing the FTC Report and further info on the effect of boutique fuel requirements on gas prices.