The bad news is that gas prices probably won’t be decreasing in the foreseeable future. But the good news, says Marty Koger, is that buying a tank of gas for your car is still a pretty good deal.
Koger’s family has been selling gas and diesel fuel in Augusta since 1927, and he has been in the business since 1980. He once owned several area gas stations but now owns a company delivering ethanol, an important ingredient in the gas we put into our cars. He still follows the petroleum situation closely.
“I would not bet on the price going down anywhere to close to $2 (per gallon),” he said.
The national average this week was $4.24 per gallon, nearly $2 per gallon than it was before covid lockdowns two years ago, and nearly $2.50 more than it was during the early days of the pandemic.
Currently, Georgia sits atop the list of the cheapest gas prices in the country, at a $3.69 statewide average Thursday afternoon, according to GasBuddy (a few pennies higher locally). But that is partly an illusion.
On March 18, Gov. Brian Kemp suspended the state’s 29.1 cents per gallon tax until May 31. If that isn’t extended, on June 1 gas prices in Georgia will jump up to $4 or more.
Uncertainty is the Biggest Factor
Although President Joe Biden has blamed the spike in prices on Russian President, Vladimir Putin and his war in Ukraine, and at other times on oil companies “price gouging” for big profits, Koger said the biggest factor is simply uncertainty.
“The thing that moves the price now is uncertainty,” he said. “It’s fear. No one knows what to do because the world is in significant disarray. It’s the uncertainty that affects us all.”
Koger said that a few areas on the West Coast may be affected by cutting off oil shipments from Russia, but the rest of the country is well supplied with American oil.
“We’re fortunate in America to have our own crude,” he said. “Our imports come from Canada, Mexico, and Venezuela to make up for what we don’t produce locally.”
Two markets determine the price of a barrel of crude oil – West Texas Intermediate (United States) and Brent (United Kingdom). On Thursday, West Texas had a price of $95 per barrel while Brent was at $103. But a lot happens to that oil and the price before it reaches the corner gas station.
A Long Way from Barrel to Gas Pump
A barrel of oil contains 42 gallons, which various sources list as producing about 19 gallons of gasoline, 10 gallons of diesel fuel, four gallons of jet fuel and the rest separated chemically to make a wide range of products, the biggest one being plastics.
“It costs a lot of money to make a gallon of gas,” Koger said.
Once refined, the gasoline is then shipped either via pipelines or on ships. For the Augusta area, the gas flows through a pipeline that stretches from Texas to New York and then diverts via a pipeline spur to collection tanks in North Augusta (off 1-20 exit 5). It takes 11 days for the gasoline to travel along the pipeline from Texas to North Augusta.
Once in North Augusta, around 20 suppliers sell the gas to distributors. Koger said about 400 tanker trucks per day ferry gasoline from the North Augusta site, some to as far away as Charleston and Savannah.
The prices set at the local stations are largely determined by factors out of their control. Koger said the price of gasoline fluctuates throughout the day based on what is happening in the marketplace, much like stock market prices constantly change. Then at 6 p.m., the price is set for the day.
That allows suppliers set the price they’ll sell to the distributors, and the distributors to set the price of the gas they’ll deliver to the local stations.
Because of the time, it takes from pumping a barrel of oil from the ground to a gallon of gas in your car tank, the price of a barrel of crude today won’t have much effect on pump prices for weeks.
“There’s a significant delay between what crude does and the price of gasoline,” Koger said. “A lot of things change during that trip.”
This, once again, means much of the price is determined by uncertainty about things such as the Russian-Ukraine war, continuing covid concerns, the price of agriculture products, and, of course, politics. So Koger foresees pump prices staying closer to current prices than what we saw three years or more ago.
“Peace will help,” he said. “Stability in the marketplace comes from certainty.”
Gas is Still a Bargain
But he added that all things considered, gas is still a bargain compared to other automobile expenses. Depending on the vehicle, most people spend more per year on insurance and interest payments than they do on gasoline. And the biggest expense of any vehicle is depreciation – a vehicle generally decreases in value by about 25 percent per year.
“When you add up all the other things that go with owning a car, they’re much more expensive than gas,” he said.
That holds true when gas is compared to other things people buy almost daily – it takes six or seven 20-oz. cups of regular coffee from Starbucks to yield a gallon of coffee – a rate of nearly $20 per gallon.
“We need to reflect on how cheap energy is in America,” Koger said. “We in the U.S represent five percent of the world population, but we consume 25 percent of the world supply of crude oil. We don’t realize how fortunate we are.”