If the summer of 2000 becomes known as the season of the highest gasoline prices in Chicago history, we won’t have only Middle Eastern oil ministers to blame.
The American Automobile Association reported this week that Illinois gas prices are the highest of any state in the continental United States.
And while the efforts of the Organization of Petroleum Exporting Countries last year to drive up prices by limiting oil production certainly had an effect, weary Illinois drivers are also the victims of recent developments closer to home.
A new requirement by the Environmental Protection Agency for cleaner-burning gasoline is hitting Chicago especially hard. Chicago is one of the few U.S. cities for which the EPA requires the special gasoline, and a single company–Unocal Corp. of El Segundo, Calif.–has a patent on that formula. Many other gas companies have refrained from producing the EPA-mandated gasoline for fear they will owe Unocal millions of dollars in royalties.
A second problem: A critical pipeline that supplies gasoline to the upper Midwest burst near Dallas in early March, which stopped the flow of fuel for five days. Because Chicago-area gas inventories already were low, the five-day cutoff left the area in a state of extreme fuel shortage from which it still has not recovered.
“We are in a spiral that isn’t stopping,” said Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association. “Gasoline just went up 3 cents a gallon yesterday. We are in short supply and demand is increasing.”
The steadily escalating gasoline prices, which in Chicago on Tuesday hit an average of $1.98 per gallon for unleaded regular, are prompting calls for state legislative hearings and a U.S. Department of Justice investigation. The national average for unleaded regular gasoline is $1.56 a gallon.
State Rep. Rick Winkel, (R-Champaign) and State Rep. Raymond Poe (R-Springfield) called for hearings this summer into gas prices, questioning whether there was “collusion” in the petroleum industry. In Wisconsin, which has the second most expensive gasoline in the continental U.S. at an average of $1.72 per gallon, U.S. Sen. Herb Kohl (D-Wis.) and a group of other Democratic congressman have asked U.S. Atty. Gen. Janet Reno to investigate their state’s high gasoline prices.
As bad as things are, it’s still not clear that the current fuel-price run-up will rank among the worst in the U.S. The notorious oil-price shocks of 1973 and 1979-80–the products, respectively, of an OPEC oil embargo and the Iran-Iraq war–were still worse. Those episodes produced unforgettable memories of long lines at gas stations. And, at least in inflation-adjusted terms, prices were higher at the pump during both periods.
A Cambridge, Mass.-based think tank asserts that the current price increases are being hyped, noting in a new report that our gasoline bills, in inflation-adjusted dollars, are still cheaper than those paid by our parents and grandparents.
In 1960 gasoline was roughly 30 cents a gallon; but in today’s terms, that amounts to $1.75 a gallon, according to the report, which was issued by Cambridge Research Associates. In 1980 gasoline was about $1.25 a gallon, but in inflation-adjusted dollars, that would amount to $2.50 today, the report said.
The report noted that prices have trended steadily downward, with two major exceptions, the oil shock years of the 1970s and the Persian Gulf crisis of 1990-1991.
“Gasoline is cheaper per gallon than milk, spring water, coffee and other common consumables,” said the report. “Mouthwash weighs in at about $18 per gallon.”
According to the report, gasoline represents about 3.1 percent of household expenditures.
Bill Veno, an oil industry expert with Cambridge Energy, said Chicago’s situation is similar, if not identical to California’s position in spring 1999.
In California’s case, refinery mishaps temporarily sent gasoline prices through the roof, Veno said.
“But with prices like this, everybody and his brother will be working to get his gasoline into the market,” Veno said. “We expect crude oil prices will start to weaken and resume the trend we observed over the past 60 years.”
Veno, however, couldn’t say when that would happen.
This is small consolation to puzzled consumers such as Terrence Dillon, a retiree from Northfield.
“The ease with which they jack up the prices–without sufficient explanation–is troubling,” Dillon said. “We hear excuses from refiners and the consumers continue to pay the freight.”
Consumer fixation with the price increases has led the American Automobile Association to begin posting daily gasoline price updates on its Web site. Consumer passions on the topic led the American Petroleum Institute, which represents the major oil companies, to issue a defense for record 1999 industry profits on its Web site.
Taxes are a core chunk of the problem for Dillon and other consumers in the Chicago area. The combinations of federal, state, county, city and regional transportation authority taxes add almost 50 cents to the cost of a gallon of gas.
Everyone in the state pays a federal motor fuel tax of 18.4 cents a gallon, an Illinois state motor fuel tax of 19 cents a gallon, an Illinois state sales tax of 6.25 percent and an Illinois state leaking underground fuel storage tax of 1.1 cents a gallon.
On top of that Chicagoans pay a 5 cents-per-gallon city motor fuel tax and a 1 percent sales tax. Add to that Cook County’s 6 cents per gallon motor fuel tax and a 0.75 percent sales tax. Then there’s a Regional Transportation Authority sales tax of 0.75 percent in Chicago and Cook County.
Regional Transportation Authority sales taxes are 0.25 percent in Lake, Kane, Will, DuPage and McHenry Counties. On top of that, DuPage County has a 0.25 percent sales tax and a 4 cents-a-gallon motor fuel tax. McHenry County has a 4 cents-per-gallon motor fuel tax and Kane County has a 2 cents-per-gallon motor fuel tax.
Gas marketers take umbrage at the implicit assertion of politicians that they are gouging consumers.
“We are the only retailers that post the price of the product–with the taxes in it,” said Fleischli, of the Illinois Petroleum Marketers Association. “I hope they’ll look into the prices of snow shovels in June and compare them to the price of snow shovels in November, rather than looking at an industry that is taxed and regulated to death.”
Instead, Fleischli’s group said lawmakers should be acting on a bill being pushed by their group to cut the state motor fuel tax by 5 percent. Illinois is only one of seven states that has such a tax.
