To provide SDREO supporters with a more diverse picture on energy-related issues, SDREO is introducing “Opinions,” a new quarterly section that invites industry experts to voice their opinions on various energy issues affecting the San Diego region. The views and opinions expressed in the following article do not necessarily represent those of SDREO.

De-MYTH-stifying San Diego's High Gas Prices
By Michael Shames, UCAN

What is the cause of our region’s high gasoline prices? Why is there a 35-40 cent average price gap between California’s gasoline prices and the rest of the nation? Experts from the oil industry have provided various reasons and Michael Shames, the executive director of the Utility Consumers’ Action Network (UCAN), summarizes those reasons and offers a response.

MYTH: "San Diego’s high gasoline prices are due to shipping costs."
Not true. The oil industry has frequently argued that the cost of shipping gasoline to San Diego from Los Angeles refineries adds 6-8 cents per gallon. The truth is that the cost to ship gasoline through the Los Angeles/San Diego pipeline is regulated by the State of California at 1.5 cents per gallon. The pipeline competes with over-the-road gasoline haulers that frequently charge less than the pipeline company to ship fuel. As it turns out, Arco’s pricing strategies caused the persistent gasoline price gap between San Diego and Los Angeles.

read more>>

Energy for the Younger Generation

It's summertime and kids are out of school. Hotter days, along with increased energy costs, are fast approaching. To teach kids about saving energy, SDREO is presenting "Kids Korner," a fun and interactive energy education tool housed within SDREO's website.

read more>>

Program Spotlight:
Business Energy Services Team

The Business Energy Services Team (B.E.S.T.) Program was created for businesses and public agencies with an annual average maximum electric demand of 20-100kW. It evaluates business energy usage, provides a customized analysis, and even pays for a majority of the total project costs. Payback on energy-efficient measures averages 6 months or less, making the program viable not only for owner-occupied facilities, but also for leased buildings.

read more>>

OPINIONS: San Diego's High Gas Prices... (cont.)

MYTH: "When oil costs more, gas always costs more."
Not necessarily true. Although it is not unusual for California motorists to see sharp price hikes just days after the Organization of Petroleum Exporting Countries (OPEC) raises its prices, there is little relationship between the two. It takes 90 to 120 days to drill, transport and refine crude oil into gasoline. Plus, more than 90% of California’s gasoline comes from West Coast drilling operations. As a result, OPEC has little impact on the real production cost of California gasoline.

MYTH: "Consumers are being gouged by retailers."
Not true. For most San Diego retailers, the average profit margin on a gallon of gas is between 5-15 cents per gallon. Because oil companies dictate the price that its branded dealers can charge, the retailers have little say – and little opportunity – to gouge its customers.

MYTH: "The free market sets prices in my city."
Not true. UCAN has been tracking gasoline prices since 1998 and our data suggest that the market is neither free nor competitive. Unlike most commodities, the price of the same brand and grade of gasoline can be as much as 25 cents per gallon higher, depending on the location of the station. This is because oil companies price their gas using "zones." A Unocal dealer across the street from another Unocal dealer can be forced to pay 10 cents more per gallon because he is in a different "zone." Oil companies claim that zone pricing allows them to be more competitive. In reality, it allows them to arbitrarily drive dealers out of business by charging higher fuel prices, and artificially control and inflate the price of gasoline.

MYTH: "Locally-owned gas stations cause high prices."
Not true. After eight years of investigating retail street prices, UCAN has conclusively documented that in areas where there are no independent, locally-owned gas stations, the prices can be as much as 20 cents higher per gallon.

MYTH: "Regulators caused the high gas prices."
True. The Federal Trade Commission has allowed merger after merger, believing oil industry claims that by making Big Oil bigger, it would increase competition. As a result, 90% of California’s gasoline supply is controlled by only five oil companies. UCAN’s preliminary research suggests that the recent merger of British Petroleum and Arco may have served to make Arco less competitive.

MYTH: "Pollution-fighting fuels have forced prices up."
Not exactly true. California is notorious for having expensive pollution-fighting fuel blends. The California Energy Commission estimated that this unique fuel blend adds 8-14 cents a gallon to the price of fuel. At this time, the primary pollution-fighting additive used in California’s gasoline is refined ethanol, which actually costs less than gasoline. UCAN is unable to conclude that fuel blends are the key driver behind higher gas prices.

MYTH: "There is plenty of competition… just look at all the different brands of gas!"
Not true. On the surface, the San Diego market looks competitive. After all, there are dozens of different brands with different prices. The truth is a different story. All Shell and Texaco stations are owned by the same holding company, Equilon. TOSCO, another holding company, sets prices for all of the Union, Unocal, 76 and Circle K gas stations in San Diego. Exxon and Mobil merged recently, and every Thrifty station is owned and supplied by Arco/British Petroleum. UCAN’s statistics show that price competition in San Diego has waned as a result of market consolidation.

MYTH: "There’s really nothing that California can do to fix the problem."
Not true. UCAN has made the following recommendations to the state government regarding California’s high gas prices: the suspension of the sale of 89 octane gasoline in California to free up storage; the required disclosure of quarterly profit margins by gasoline refineries and oil companies with retail operations in California; the re-introduction of legislation that will allow independently-operated franchises to purchase gasoline from multiple sources at competitive prices.

To date, none of UCAN’s recommendations have been adopted by the state. Governor Schwarzenegger claims that he will make specific recommendations to deal with the gasoline price issues later in 2005. Meanwhile, motorists pay and pay and pay... with little relief in sight.

- TOP -

Younger Generation... (cont.)

Kids Korner delivers engaging and informative “energy edu-tainment” via the web. Using colorful animations, playful graphics, interactive games, puzzles, science experiments, house projects and online coloring books, the site explores everything from power generation sources, transmission and distribution to electrical safety, energy efficiency and a home energy survey.

For example, using the Kids Korner lighting or appliance calculator features, kids can easily compute how many of their favorite toys or games can be purchased for the amount of money saved by converting incandescent lamps to compact fluorescents or by changing their appliance use. Over 100 pages of content are presented online with Kids Korner.

"Kids Korner makes learning about energy fun, which encourages children to want to learn more," says Stephen Kapp, SDREO's program manager for the San Diego Energy Resource Center. "Some of the content is quite in-depth, such as the how fuel cells work animation sequence. This makes the site an excellent resource not only for kids, but for adults as well. You can learn about energy together and discover ways to conserve."

Children are the energy decision-makers of tomorrow, and the site is an effective, yet fun tool to teach kids about the different sources of energy and how to use energy wisely.

- TOP -

Program Spotlight: B.E.S.T. (cont.)

Businesses participating in the B.E.S.T. Program receive the following:

• A no-cost facility assessment conducted by a B.E.S.T. Program inspector or contractor to identify potential energy-saving equipment opportunities
• A detailed proposal that includes a list of recommendations, estimates of energy savings, project cost, payback period, and the rebate amount to be paid by the B.E.S.T. Program
• Installation of the approved energy-saving equipment by a pre-qualified contractor
• Pre- and post-installation inspections to assure quality and verify energy savings
• Minimum hassle or time required of participating businesses
• Energy bill cost reductions

Eligible equipment includes indoor and outdoor lighting, heating and AC system controls, refrigeration, window film, and other proven technologies. The program pays for all professional services and up to 100% of the total project cost! Businesses and public agencies must be non-residential SDG&E electric customers and not on Schedule A.

For more information or to participate in the program, contact B.E.S.T. Program Manager, Dave Gordon, by calling (858) 244-1183 or by filling out a contact form.

- TOP -