Everyone whines about high prices at the gas pump, but a report in the Houston Chronicle says part of the problem locally is... our government and its allies in the farm lobby.
Gasoline market observers said the biggest factor of the moment driving up the price of gasoline in Houston is high ethanol prices.Posted by Alan at June 11, 2006 09:35 PMThere are many other factors that go into setting the price of a gallon of gasoline — station operators have different fuel suppliers, competitors, rents and retail operations — which helps explain why there can be a dime's difference in the price of unleaded gas at stations a couple of blocks apart.
Though ultimately gasoline prices react to oil prices, for now there are also concerns about the cost of the ethanol coming from the Midwest.
The Houston area and the Dallas-Fort Worth area share the distinction of having the most expensive gasoline in Texas. In both places service stations are required to sell a gasoline blend with 10 percent ethanol that is designed to reduce emissions in these cities with air pollution problems.
Because of the high level of air pollution in this area and the Dallas-Fort Worth area, gas stations in eight counties throughout the Greater Houston area and four in North Texas use a formula of gasoline mixed with 10 percent ethanol. This has pushed up prices because ethanol is now far more expensive than the additive it replaced: MTBE, or methyl tertiary butyl ether, which has been linked to water pollution.
The gasoline sold in Beaumont or Corpus Christi doesn't need to be blended.
Brad Proctor, an analyst with GasPriceWatch.com, said the higher prices reflect the switch by oil refiners to gasoline blends with ethanol in major markets with pollution problems.
As a result of a nationwide changeover to ethanol from MTBE, many of the bio fuel suppliers in the corn belt states have struggled to accommodate increasing demands for ethanol.
"It's now in great demand so the farmers' prices are going up. It's like anything, when demand goes up, the price of a commodity goes up," Proctor said.