According to Michael Ports of the Society of Independent Gasoline Marketers of Americas, "Twenty years ago, there were two blends of gasoline offered in three octane levels, and essentially one blend of diesel fuel. Today, there are more than 18 unique blends of gasoline mandated across the nation — again offered in three octane grades — and at least three different blends of diesel fuel." Okay, let’s do the math. I make it… 59 different blends of gasoline spread out over 50 states. Just to make things that much more complicated, no one refinery produces all 59 blends of gas; nor is any refinery typically dedicated to any one grade.
OK, let's say a particular blend of gas for the Atlanta area is made in, oh, Louisiana and Mississippi. And let’s further imagine that a Category 4ish storm named something like Katrina pounds through the area, heavily damaging the refineries, destroying their ability to blend Atlantagas. So, all Atlanta has to do is call up Florida and ask for some Orlandogas, right? Well, no. Turns out the closest supplier of that particular formula of gas might be somewhere like… Europe. Until some big boats brimming with Atlanta-friendly gas cross the pond, load up a few thousand tank trucks and deliver the requisite blend, the local population is forced by legislative fiat to ponder pump prices hovering around $5.57 a gallon.
What’s more, all three octane levels of Atlantagas are all likely to have unique chemical constituents that the other 56 official blends do not. Those ingredients must be transported to the refinery. Some of them, such as Ethanol, may have special production and handling requirements, which adds time, effort and, of course, money to the equation. By the time a new refinery is ready to make Atlantagas somewhere else in the country, the original refineries may start trickling back on-line. The producer must weigh the simple advantages of riding out the storm. If they’re really unlucky, another storm (call it Rita) could be heading towards the new refining location.
Speculation is another factor adding to the recent gas price fluctuations. Back when gas was $2.00 a gallon, industry experts speculated that speculation was adding five to seven cents to a gallon of gas. In the wake of hurricanes, the “investor effect†has been both more volatile and more pronounced. Basically, some heavily moneyed folks are betting against The Truth About Oil; they’re making a short-term gamble that the price of oil will keep going up. Because this strategy has been successful in recent years, more commodities investors are doing it, which inflates the demand (and price) of oil (and gas).
These factors blend together (so to speak) to create a sub-economy so complex it takes a Congressional inquiry or four to prove that "big oil" is not guilty of price gouging. Although scoring political points seems to be our elected officials’ official business, Congress would be better advised to simplify the regulatory chaos surrounding US gas production and distribution. I'm all for clean air, but there is no way that 59 different formulas of gas are necessary to accomplish this laudable goal. Picking a winning formula, even if it is more expensive to begin with, would help prevent supply and distribution problems. During times of crisis, the ability to borrow a cup of premium unleaded from your neighbor would be a strong force against severe price fluctuations, speculation and gouging.
