Gas Price FAQ - News, Weather, Sports, Toledo, OH

Gas Price FAQ

Soaring gas prices are threatening to produce political headaches and dampen the nation's economic recovery, but neither the White House nor Congress seems inclined or able to intervene.

Here are some questions and answers on the subject:

Q: Why are gas prices so high?

A: In short, there's a tight balance of supply and demand, and jittery traders worry the market will tighten even further. The latest gasoline surge, which saw prices at some pumps jump a dime a gallon overnight, was blamed on crude oil prices that peaked at $67.10 last Friday, and a string of refinery disruptions amid continuing strong demand.

Q: How high could prices go?

A: The national average last week was $2.55 a gallon, a jump of 68 cents over a year ago, according to the Energy Department. Gas inventories have declined for the past five weeks, reflecting strong demand despite high prices. Wholesale gasoline prices for September delivery have been increasing and no one is ruling out $3 a gallon gas before the end of summer. Prices are likely to ease a bit after Labor Day with a decline in demand.

Q: What can the government do?

A: There is little either the White House or Congress can do that will reduce gasoline and other energy prices significantly in the short run, most analysts say. President Bush has said he wishes he had a magic wand to lower prices, but he has few options that would significantly increase crude oil supplies or reduce demand.

Q: Doesn't the government have an emergency oil stockpile?

A: The Strategic Petroleum Reserve contains nearly 700 million barrels of oil that could be made available at the rate of 4 million barrels a day, about a fifth of daily demand. Some congressional Democrats have urged Bush to use the SPR oil to try to ease prices. The White House says the oil is to be used only in response to a disruption of imports.

Q: The Energy Department is diverting oil to fill the reserve. Doesn't that add to the tight market and high prices?

A: The Energy Department has steadily been putting oil from federal fields into the reserve instead of allowing it to flow into the market. It will add another 700,000 barrels this month, bringing the total to the reserve's current maximum capacity. Administration officials say that amount of oil would have no significant impact on oil markets.

Q: Congress just passed a broad energy bill that Bush signed into law. Does it contain anything that might ease the pain at the pump?

A: The bill generally ignores the current oil and gas price crunch. Bush and congressional leaders say the law is aimed at giving the country a more diversified mix of energy sources by spurring expansion of nuclear power, clean coal technology and renewable sources such as wind power. It will do little if anything to affect demand for oil, especially in transportation.

Q: What measures can be taken to reduce U.S. dependence on foreign oil and ease the supply-demand crunch?

A: Not much as far as today's high prices are concerned. But more than half of the oil is used by cars and trucks. Increases in automobile fuel efficiency, including a shift to more gas-electric hybrids is viewed by many as key to curtailing gasoline  and oil  demand. The Bush administration argues more domestic oil must also be produced including oil in the Arctic National Wildlife Refuge in Alaska. These are all long-term ideas.

Q: What has been the administration's response to the current high gasoline prices?

A: White House and Energy Department officials directed motorists Tuesday to a government Web site of ``gas mileage tips'' at www.fueleconomy.gov. It urges motorists to slow down, get cars tuned up and check tire pressure; join car pools and use more mass transit or telecommute in jobs, and take unneeded items such as golf clubs out of cars to reduce weight.

 Q: What about price gouging. Why isn't the government doing anything about that?

A: Neither the Energy Department nor the Federal Trade Commission has found evidence of price gouging in the current run-up of gasoline prices. The Energy Department has created a Web site for motorists to use to contact them if they suspect price gouging. It is http://gaswatch.energy.gov.

Q: Are today's gas prices the highest ever?

A: Not when not taking into account inflation. In March of 1981 regular grade gasoline cost $1.48 a gallon, which after adjusting for inflation, would be equal to $3.11 a gallon today.

Q: When a customer spends a dollar at the pump, where does that go?

A: More than half, 55 cents goes for crude oil, 18 cents for refining, 19 cents for state and federal taxes, and the rest for distribution and marketing operations, according to the Energy Information Administration. At each stage producers, refiners and retails take a cut.

On the Web:
American Automobile Association: http://www.fuelgaugereport.com/index.asp
Energy Information Administration: www.eia.doe.gov

The Associated Press contributed to this report.

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