Motor Fuels:

Gasoline Price Spikes in Oregon in 1999

RCED-00-100R: Published: Feb 23, 2000. Publicly Released: Feb 29, 2000.

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Pursuant to a congressional request, GAO provided information on the extent to which retail gasoline prices in Oregon spiked from January through August 1999 and the factors that accounted for the spikes.

GAO noted that: (1) retail gasoline prices in Oregon spiked in the spring and again in the summer of 1999; (2) during the spring spike, average retail prices rose from a 4 1/2-year low of $1.01 per gallon in February to a high of $1.47 per gallon in April--an increase of 46 cents; (3) for the summer spike, after falling by about 14 cents per gallon, average prices rose from $1.33 per gallon in June to $1.52 per gallon in August--an increase of 19 cents; (4) over the whole period, from February to August, Oregon's average retail gasoline prices increased by about 51 cents per gallon, compared to an average of about 33 cents per gallon for the rest of the United States; (5) the price spikes in Oregon were due primarily to supply-related problems in California and Washington; (6) according to oil industry officials and experts GAO contacted, the spring spikes were caused primarily by disruptions in refinery operations in California, which reduced gasoline production; (7) according to estimates by the Department of Energy's Energy Information Administration, about 12 to 15 percent of California's gasoline production may have been affected by these disruptions during this period; (8) the summer spike was due mostly to a combination of additional refinery disruptions in California and an explosion, in June, on the Olympic Pipeline, which carries the bulk of the gasoline supplies that go from Washington to Oregon; (9) gasoline supplies from Washington to Oregon through the pipeline went from 2.65 million barrels per month in May to 1.49 million barrels in June and 1.02 million barrels by September; (10) alternative modes of transportation, such as barges, tankers, and trucks, were used to ship gasoline to Oregon to compensate for this outage; (11) this added to the price increases because these types of transportation are generally more expensive and slower than pipeline; (12) in both spikes, price increases may have been exacerbated because uncertainty about supply may have caused gasoline dealers to scramble to buy more gasoline than is usual for fear of running out of supplies in the future; (13) this increased demand would contribute to rising wholesale and, ultimately, retail prices; (14) in addition, crude oil prices were generally rising during the period of the price spikes, leading to higher gasoline prices in Oregon and in the rest of the country; and (15) as part of the West Coast gasoline market, Oregon's price trends tend to more closely resemble trends in California than in the United States in general.

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