Why higher gas prices?

Testimony on factors influencing gasoline prices, presented by the Government Accountability Office (GAO) to the Senate Judiciary Committee, was released Feb. 1 by GAO. Gas prices impact the economy because of our heavy use of motor vehicles. The U.S. consumes about 45 percent of all gasoline consumed in the world. The Energy Information Administration (EIA) calculates that every ten cents added to a gallon of gas adds $14 billion to the nation's gas bill. GAO's testimony addressed: (1) factors that affect gas prices, (2) the pattern of oil company mergers in the U.S., and (3) effects of mergers on market concentration and wholesale gas prices.

GAO found: (1) "Crude oil prices are the fundamental determinant of gasoline prices." Other factors include U.S. refinery capacity, gasoline inventories, and regulatory factors such as air quality standards. (2) In the 1990s there were over 2600 mergers involving all three segments of the U.S. petroleum industry - 85% of the mergers were in exploration and production, 13% in refining and marketing, and 2% in transportation. Since 2000 there have been 8 mergers in different segments of the industry. (3) Mergers increased market concentration in refining and marketing, resulting in small wholesale price increases from 1 to 7 cents per gallon.

ENERGY MARKETS: Factors Contributing to Higher Gasoline Prices, GAO-06-412T
     Full report (pdf, 196KB, 13p.)
     Highlights (pdf, 60KB, 1p.)
     Abstract (html)

Earlier GAO reports referred to in the testimony:

GASOLINE MARKETS: Special Gasoline Blends Reduce Emissions and Improve Air Quality, but Complicate Supply and Contribute to Higher Prices, GAO-05-421, June 17, 2005
     Full report (pdf, 1.14MB, 51p.)
     Highlights (pdf, 40KB, 1p.)

MOTOR FUELS: Understanding the Factors That Influence the Retail Price of Gasoline, GAO-05-525SP, May 2, 2005
     Full report (pdf, 3.67MB, 61p.)
     Abstract (html)

ENERGY MARKETS: Effects of Mergers and Market Concentration in the U.S. Petroleum Industry, GAO-04-96, May 17, 2004
     Highlights (pdf, 88KB, 1p.)