By Keith Mauck
With so many people still suffering from the impact of Hurricane Sandy, knowing that the United States entered the 2013 hurricane season June 1 is a bitter pill to swallow.
Of course, we know that New York and New Jersey bore the brunt of Sandy’s wrath.
Still today, a quick drive through many oceanside boroughs reveals Sandy’s ugly work. More than 650,000 housing units were damaged or destroyed in both states, and approximately 455,000 businesses were disrupted.
Although several months have passed since the storm plowed through the Northeast Corridor, about 900 people still have no permanent housing, leading a New York judge on May 15 to order the hotel housing program to continue.
Major hurricanes, including Katrina, Rita and Andrew, affect not only those living along the nation’s coastlines, but also can cause damage and economic hardship inland.
Severe weather disrupts electricity service, cellular communications and the delivery of gasoline supplies, which can result in higher pump prices.
Rising gasoline prices tend to make consumers angry. They often point fingers at the big oil companies and insist they are being ripped off at the pump.
In Hurricane Irene’s aftermath, two New York service stations were investigated for alleged price-gouging and paid fines without admitting guilt.
But, in general, economists say oil companies are price-takers, not price-makers. Pump prices are determined by the market and influenced by several factors, including global oil prices, government regulations, federal and state taxes, U.S. monetary policy, political instability in oil-producing nations, the laws of supply and demand — and the weather.
Thousands of traders who buy and sell crude oil through commodities markets around the world help to determine oil prices. Since gasoline is made from crude oil, pump prices track oil prices. In the past four years, gasoline prices have climbed from about $1.61 a gallon to a high of about $3.90. The government reports that they recently dropped back to a nationwide average of about $3.54 per gallon. Much of the price fluctuation can be attributed to oil price movements.
In the United States, government regulations are one of the biggest factors in the cost of gasoline and diesel fuel. During the past several years, the oil industry has complied with government mandates that have radically changed motor fuels and imposed costs on fuel production.
Refiners have removed lead, added ethanol, greatly reduced sulfur from both gasoline and diesel fuel, created special fuel blends for certain parts of the country, adjusted the recipe for gasoline seasonally so it won’t evaporate quite as readily in warm weather, and invested billions of dollars to prevent emissions from getting into the air.
Recently, the Obama administration announced a proposal to further reduce the amount of sulfur in gasoline by two-thirds, although it already has been lowered by 90 percent. The Environmental Protection Agency says the reduction is necessary to make catalytic converters work better.
An analysis by the energy consulting firm Baker and O’Brien shows it could add up to 9 cents per gallon.
Federal and state governments also add excise taxes to every gallon. The federal gasoline tax is 18.4 cents a gallon. State taxes range from a high of 68.9 cents a gallon in New York to 26.4 cents a gallon in Alaska. New Jersey’s tax is fairly low at 32.9 cents a gallon.
Fuel taxes usually are incorporated into the retail price and not displayed separately on the pump.
U.S. economic policy also affects prices, because crude oil is priced in U.S. dollars. As the government prints more money, the dollar tends to lose value, and traders have to pay more for each barrel of oil. Recent reports from the International Energy Agency and the U.S. Department of Energy, however, indicate that global oil demand is falling.
Given the complexity of oil operations and pricing influences, it’s not surprising that some consumers are puzzled or even suspicious of gasoline prices, especially since fuel is essential to the American way of life.
There are logical reasons for price fluctuations, and foul weather is one of them.
Keith Mauck, J.D., is publisher of GoMarcellusShale.com and resides in North Wildwood Crest.
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