Everything You Wanted To Know About Gas (Part 1,2,3)
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Updated: 7:20 PM Jul 7, 2009
Everything You Wanted To Know About Gas (Part 1,2,3)
Everything you ever wanted to know about gas (but were afraid to ask....) Part 1,2,3
Posted: 6:55 PM Jul 7, 2009
Reporter: Kristina Hamilton
Email Address: Kristina.Hamilton@wjhg.com
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John McDonnell of Biloxi, Miss., stocks up on gasoline Wednesday Aug. 27, 2008 in anticipation of Tropical Storm Gustav becoming a hurricane and affecting southern Mississippi. McDonnell, whose house flooded in Hurricane Katrina, said "If I need it for the generators, I got it. If I don't I can put it in the truck when the gas prices go up." (AP Photo/John Fitzhugh, Sun Herald)
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PART 1
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Why is there so much mystery surrounding gas prices?

Financial Adviser Steven Moss says it's because gasoline is a convoluted issue.

"It's kind of a complex one because there is a lot of macro economics ins and outs going on in regards to that," says Moss.

Fill up your tank one week, and there's a good chance the price will be different the next.

That could be tough on people with a fixed personal budget.

So why exactly do gas prices fluctuate?

"There are so many factors. It's easy to say it's a supply and demand thing. Less supply, demand stays the same sure the price will go up. And there are so many factors there's geopolitical, there's the OPEC nations, there's the refineries, there's a lot of different pieces of this puzzle that go into really ultimately what you pay at the pump. I wish it was easy as the supply and demand thing, but it really isn't" says Moss.

There are essentially four steps that produces the gas you buy.

The first steps is finding and acquiring the actual crude oil from the earth.

The most costly step.

Crude oil prices are set by commodity traders and speculators, who are being blamed for the gas crisis the last several years.

The second step is refining the crude oil into usable energy.

The third step on the way to your gas tank is the distribution process, getting the gas from the refinery to a wholesaler.

Panama City is home to a Chevron Terminal where the gas is then sold to gas stations from Blountstown to Niceville.

It arrives once a week on a barge, by barge, the tanker trucks arriving at all hours of the day to haul the gas to local stations and convenience stores.

Each step along the way, the price goes up.

Then Uncle Same tacks on federal, state and sometimes local taxes.

Each state has a different tax structure.

Because Florida does not have a state income tax, it charges the fourth highest gas taxes in the country.

As for why prices go up around holidays like Spring Break, Memorial Day, and 4th of July, it goes back to supply and demand

More demand during a driving holiday, drives up the prices.

This year has been different.

The recession is keeping a lot of people home for the 4th, so analysts are expecting gas prices to actually drop.
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PART 2
Some people will only buy their gas from a big name oil company like Chevron, BP or Shell.

Others say it doesn't matter, because the gas all comes from one place.

In Panama City, it's this terminal on Beach Drive.

Both answers are right.

Panama City Chevron Terminal Manager Kevin Charles says almost every station in the Panhandle gets it's gas from him.

And the gas that comes out of the storage tanks is all the same.

But the gas that leaves the terminal in the tanker trucks is different.

While loading the trucks, Charles' crews mix-in different additives for each company.

Chevron, Shell, Citgo and BP all have their own special additives that make their brand unique.

There are even additives for those independent mom and pop gas stations.

"We have also what's called a generic additive...So if there is some unbranded stations that you see around that aren't a shell or something or if it's just mom and pop gas station we have an additive package that meets all the EPA specs that is blended into the fuel while it is being loaded into the rack," says Charles.

There's a new additive that's stimulating a lot of discussion, even some controversy.

It's that little sticker on the pump that says all gas contains up to 10% Ethanol.

Some people want to know why.

"That's really an environmental measure and what that does is it allows consumers or at least reminds consumers that 10 percent of the fuel that their pumping into their vehicle is actually ethanol and it's a cleaner burning fuel" says AAA specialist Gregg Laskoski.

The Panama City Terminal started adding Ethanol to their gas in October, from this large tank.

While some argue Ethanol is good for the environment, says not everyone agrees it's good overall.

"A lot of people debate the over all effectiveness of ethanol because to produce ethanol requires a lot of energy..a lot of energy consumption...So it's not like you get anything for free people are looking at what it costs to produce gasoline and what the impact is on the environment, but at the same time production of almost any alternative fuel also has associated costs," says Laskoski.

Laskoski does not see the day when vehicles will run entirely on Ethanol, because he says it still leaves a carbon footprint and would significantly raise the price of corn.
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PART 3
Last year the price of crude oil was $140 a barrel.

A gallon of gas was $4.25.

Today a barrel of crude is only 70-dollars a barrel, 50% less.

So why isn't a gallon of gas half as much?

"There's not a mathematical correlation between crude prices and retail gasoline prices because there are many other factors at work," says Laskoski.

Laskoski says some of those other factors are the refineries, world events like unrest in the middle east, even natural disasters like hurricanes in the Gulf.

"It's traded on a minute by minute bases on the new york mercantile exchange and so all kinds of world wide events impact crude prices," says Laskoski.

Since oil is traded using the value of the American dollar our economy also plays a role.

Laskoski says, "Last year when we saw gasoline prices going over $4 a gallon the main reason for that is because crude oil hit almost $147 a barrel and you have to say well why? Why did crude go so high?"

It wasn't because the demand was up; in fact the supply and demand was at an all time low that year.

But we saw gasoline and crude prices go sky high and that was due almost entirely to the weakness of the U.S. dollar.

"They think if the price of crude is coming down than they think the price of gas has to come down and if crude goes up the price of gas has to go up and the generally happens, but there are cases where one can go in one direction and the other can go in another direction."

Here's another factor that only effects Floridians.

There's a state law that prohibits gas stations from selling fuel below cost.

The law was created to protect small business owners from being run-out of business by big companies.

"the reason for that is they were concerned that some of the big box retailers like Costco or Sam's Club you name it or any of the major retailers what they could do is buy up a ton of supply to undercut every local competitor on price and drive those local competitor out of business.

Eventually leaving consumers with far fewer choices, and vulnerable to price fixing from the fewer remaining stations.

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