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What’s Driving Up Local Gas Prices?

Audio

Aired 3/2/11

San Diego drivers are paying an average of $3.77 for regular unleaded gasoline right now, which is about 25 cents higher than a month ago. We speak to U-T reporter Onell Soto about why gas prices are increasing right now, and if we can expect prices to continue to climb in the spring.

This April 2008 photo shows gas prices at a San Diego area gas station.  Local gas prices are nearing the highs we saw in 2008.
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Above: This April 2008 photo shows gas prices at a San Diego area gas station. Local gas prices are nearing the highs we saw in 2008.

San Diego drivers are paying an average of $3.77 for regular unleaded gasoline right now, which is about 25 cents higher than a month ago. We speak to U-T reporter Onell Soto about why gas prices are increasing right now, and if we can expect prices to continue to climb in the spring.

Guest

Onell Soto, staff writer for the San Diego Union-Tribune

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This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

CAVANAUGH: I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. Sticker shock is back at the pump. $50 and up for a full tank of gas is putting a crimp in just about everyone's wallet here in San Diego. Some are telling us that the unrest in the middle east is causing the price in the gallon to flirt with the $4 mark, about in truth, gas prices have been moving up for about 60 months now, approaching the highs of 2008. Joining me to discuss the price of gas is my guest, Onell Soto, staff right for the San Diego Union Tribune. Onell, good morning.

SOTO: Good morning.

CAVANAUGH: How much are you paying for gas? How much of a dent is this putting in your budget? Give us a call at 1-888-895-5727. That's 1-888-895-KPBS.

SOTO: Well, the big one is the price of oil. As that goes up, that is making up a much larger part of the price that you pay at the pump. So for instance I'm just looking at some statistics from the California energy commission, back in January, oil represented almost 60 percent of the cost of a gallon of gas. Today it's 70 percent. And that accounts for a lot of the rise that we've seen in gas prices since the beginning of the year.

CAVANAUGH: And to take that one step further back, the rise in the price of oil is largely because of uncertainty about conditions in the Middle East?

SOTO: It has to do -- yes. The price right now is driven by what's happening in the middle east, specifically Libya, which is a major oil exporter to Europe. But also questions about how the political unrest might affect other oil producing countries in the region, and the way that oil gets to market.

CAVANAUGH: Now, no matter what happens across the rest of the country, in Southern California, we always seem to be on the very high end of what the national average is for gas prices. So how do our gas prices here in San Diego compare to the national average?

SOTO: We are near the top. We're among the most expensive gas in the country, and as you pointed out that it's often the case, California uses a different blend of gasoline than most of the rest of the country. We have been -- it's been formulated to fight smog, and as a result it's a little bit more expensive to make. You basically get a lot bit less of gasoline out of a gallon of oil when you get to California's standards than when you make it to the U.S.' standards. The other part of that is that California is a closed market. You can't simply take gas from Arizona or Nevada is put it in the pipeline and use it here unless it meets California's standards. So there's only a few refineries in the country, obviously most of them in California that make California grade gas. That means we don't compete with the rest of the country FOR that particular blend of gas.

CAVANAUGH: Now, you say that the average price in San Diego here today is about $3.80 of you also have an impressive array of statistics as to how the goes prices have increased over the last night, over the last month, why don't you give us that?

SOTO: Right. And this is -- the numbers are gathered by the auto club in Southern California, triple A, along with a national organization called opus. But basically we're $0.02 over the last -- over yesterday. And we're up about $0.21 over a week ago, up $0.45 from a month ago, and up $0.79 from a year ago. So you can definitely see that prices are much higher than they usually have been. We are ahead of where we were back in 2008 when we hit the record levels ever. And back in 2008, we paid 463 a galleon in June.

CAVANAUGH: And as you read over the year, in other words in early March of 2008, gas prices were lower than they are now?

SOTO: Correct.

CAVANAUGH: Okay. I'm speaking with Onell Soto, he's staff writer for the Union Tribune. We're talking about gad prices in San Diego. Onell, in a recent article you wrote about gas prices in San Diego, you wrote [CHECK AUDIO] keep the price down at the pump.

SOTO: Well, it depends, and it's a calculation you have to make to make sure that this makes sense for you. Ethanol -- many cars have flex fuel capabilities, and you're able to use a blend called E85 ethanol. But the problem with it is that you don't get good gas mileage on E85 as you do with regular gasoline. So the question is, when from a purely financial perspective, when is the ethanol blend, the mileage that you're losing there, worth the savings?

CAVANAUGH: I see.

SOTO: I guess a better way of putting it is, are you getting the same or better miles per dollar?

CAVANAUGH: And how much cheaper is a gallon of this blend than regular gasoline?

SOTO: Right -- on Tuesday, when I was looking at it, it was about $0.45 cheaper. There's a few stations around town that sell it. Of the most prominent is peer son fuels in City Heights. They have a variety of different biofuels. And this is one of them. Or alternative fuels. And this is one of them.

CAVANAUGH: Yes, hi, are you still there Onell.

SOTO: Yes, I am.

CAVANAUGH: Okay. I'm just wondering if your car can take this blend, issue you pretty much -- do you pretty much already know it?

SOTO: You don't.

CAVANAUGH: Oh.

SOTO: Sometimes there's a badge on the back that says flex fuel of sometimes if your gas cap is yellow, for sure, you can take this E85. But you can also look for a sticker inside the gas door, or look in a manual, and there's also a website. I don't have it at my fingertips right now, that has all the cars that can use this type of fuel. The idea behind it, the reason why you might not know is that a lot of manufacturers put these -- this capability into their cars in order to meet federal standards. But it wasn't something that they -- were marketing to people. So they didn't necessarily have something on the car telling you that this was available.

CAVANAUGH: I see. And as you said before, it's that balance between a lower price at the pump, but perhaps you won't get the mileage that you're used to by using this blend.

SOTO: And some of the newer cars that have this capability get much better mileage on E85 than the older ones, they have been around for quite a while.

CAVANAUGH: Getting back to gas prices, not the blend prices, but gasoline prices, are they expected to increase as we go into spring and summer? Isn't that typical?

SOTO: Typically we've seen gas prices increase as people drive more. But that pattern has not happened since 2007. We have been flirting inside a -- up until very recently, inside right around $three a gallon. So that pattern was broken for the last couple of years of it is likely that we're gonna return to that. So don't expect gas prices to go down. But it really -- since so much of it right now is based on the price of oil, if something were to happen to cause the price of oil to go way down, then that -- then you're gonna see gas prices go back down.

CAVANAUGH: And I hesitate to ask you this, but what could cause the price of oil to go back down? An outbreak of stability din the Middle East?

SOTO: That's -- that's a possibility. But more likely is an economic collapse in the world right now. You know, through the end of last year, oil prices were being driven up not because of political instability in the Middle East but because China and India were using more oil as their economies were rebounding. And people were starting to drive more. Those areas are places where cars are being sold at a much greater rate than here in the United States. So that was driving the price of oil going up. If an economic downturn were to hit those places, then their demand for oil would go down, and that could cause the price of oil to go down.

CAVANAUGH: So it was, in a sense, before this -- these recent uprisings in the Middle East actually may be a good sign for the world's economy, to see those prices come back up again.

SOTO: It depends on how you look at it, I guess.

CAVANAUGH: Yes, it does. Yes, it does.

SOTO: A recovery does affect oil prices of the reason that we had gas so cheap at the beginning of the recession was because demand was down so far that there was a [CHECK AUDIO].

CAVANAUGH: We speak so much about actually paying the price at the pump because it's so surprising when gas prices go up. But this has a wide ranging impact on our economy, doesn't it? On the price of food, on the price of everything that has to be basically trucked to one place or another.

SOTO: Oil plays a big part in our economy because it is, as you mentioned, transportation fuel. So pretty much everything that you have in your home was brought there either by truck, by train, or by ship. And all those things, generally, are driven by oil or diesel. So this has a big impact there.

CAVANAUGH: And do petroleum based products themselves increase in price as the price per barrel of oil goes up?

SOTO: Well, obviously as your raw materials go up, it makes it more expensive to create something. However the cost of manufacturing a particular item might depend -- might be a smaller part of what you pay in the store because there are other components there, including the development of the product, the marketing of it, are the sales of it.

CAVANAUGH: Right.

SOTO: So manufacturing and the raw materials that go into it are not always the largest portion of what you pay in a store for a particular product.

CAVANAUGH: So Onell, you have been tracking this now and writing articles about it, and speaking with people who are experts in this field, they're also tracking the gas prices and the price for barrel of oil. What are they expecting to see? Are they making any predictions as to whether or not gas prices could go over the peek that we see in June of 2008.

SOTO: You know I haven't heard that exactly, the question of how high is it gonna go. Part of what was driving the prices back in 2008, were speculators, people were betting that prices were gonna continue to go up. I don't know who -- I don't know if those same issues are at play right now.

CAVANAUGH: I see. Okay. So we'll just have to wait and see as those numbers keep tracking at the gas station. Well, I want to thank you so much for speaking with us today.

SOTO: You're welcome. Take care now.

CAVANAUGH: Thank you. Onell Soto is staff writer at the San Diego Union Tribune. And stay with us, if you would like to comment, please go on-line, KPBS.org/These Days.

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