Oregon’s gas prices have finally leveled off.
However, the $1.79 Oregonians are currently paying for a gallon of regular gas is still 23 cents above the national average, something that’s not likely to change, according to Department of Energy economist Jacob Bournazian.
“The only thing to bring down prices [of gas] is to lower the price of crude oil,” he said.
National crude oil prices skyrocketed in 1999 and have stayed up through the year to date. The high prices are largely due to the demand for oil exceeding the supply being put out by oil companies, Bournazian said.
“In 1997 and 1998, we had a huge glut of crude oil,” he said.
Then, the Organization of the Petroleum Exporting Countries cut back production. Instead of producing the 65.5 million gallons a day that were in demand, oil companies were only producing 64 million gallons per day, Bournazian said.
A steady decrease in supply from OPEC pushed prices up and caused stock prices to decline.
Bournazian said the breakdown of taxes and costs shows how prices became so high in Oregon:
* West Texas Intermediate, one of the nation’s leading providers of crude oil, is currently charging $32.73 per barrel of gas.
* There are approximately 42 gallons in a barrel, which makes the price 81 cents per gallon.
* The federal gas tax is 18 cents per gallon, and the Oregon gas tax is 24 cents per gallon.
* It costs about 45 cents per gallon to process crude oil, and Oregon transports and stores the gas for about 5 cents a gallon.
* After adding all the costs, a gallon of gas costs about $1.73 per gallon, and then gas stations add their costs to the final pump price.
“If gas stations were charging anything less than $1.79, they would be losing a lot of money,” Bournazian said.
Prices are high for the entire country, but Oregon prices are even higher because of limited resources, said Oregon Petroleum Marketers Association Executive Director Steve O’Toole.
“The whole West Coast has higher prices because the Gulf states have more access to oil imports,” he said.
Most of Oregon’s crude oil comes from Alaska and is processed in refineries in Seattle, then sent down pipelines. One pipeline runs through Washington and one runs through Oregon. Oregon’s line, the Kinder Morgan Line, starts by Vancouver and ends in Eugene.
There are no refineries in Oregon, only storage terminals, making the state dependent on the Seattle refineries, O’Toole said.
“If there were more refineries, the production of oil would rise and the cost would go down,” O’Toole said. “There won’t be any more refineries built, however, due to environmental concerns.”
Depending on the four Seattle refineries can cause problems, O’Toole said.
“Our prices are affected if the refineries have problems,” O’Toole said. “Our market is so vulnerable, anything that affects production can change the price [of oil].”
Oregon also has to transport gas south, Bournazian said.
With the pipeline stopping in Eugene,Southern Oregon has to get their oil trucked in from either the northern part of the state or from the San Francisco refineries,” Bournazian said. “Getting the gas down there is going to cost more.”
The conflict in the Middle East is also affecting prices, said Elliott Eki, AAA Oregon public affairs manager.
“Everything depends on what’s happening in the Middle East,” Eki said. “A truce in the Middle East is a positive sign for prices, but from what the media has been showing us, it doesn’t look like that’s going to happen any time soon.”
With the recent bombing of the U.S.S. Cole, concern throughout the oil industry increased along with prices.
“Conflicts can interfere with the flow of crude oil,” O’Toole said. “Oil went up to about $40 a gallon after the Cole was bombed.”
Prices did eventually go back down, but a similar incident in the future could have the same effect, O’Toole said.
Despite Oregon’s lack of production, a gradual decrease in price is still foreseeable, as long as there is an adequate increase in oil stocks, Bournazian said.