High Gas Prices Because of Too Little Area Competition?

John Barron, a longtime Santa Barbara resident, recently took it upon himself to ask Mayor Helene Schneider why, as he put it, the “area consistently pays the most for fuel in the entire United States, yet is so close to the L.A. area refineries.”

What follows is Schneider’s response as well as explanations provided by others she forwarded Barron’s question to.

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From: John Barron

Sent: Tuesday, March 22, 2011 4:51 PM

To: Schneider, Helene

Subject: Santa Barbara County Fuel Prices

Dear Helene,

In my 61 years of living in Santa Barbara I have still not been directed to an adequate answer as to why we pay some of the very highest fuel prices in the United States.  A gallon of diesel in Buellton this morning was $4.45 with the national average being closer to $3.81.  And we’re only about 100 miles from some of the main refineries in El Segundo and on direct, easily accessible delivery routes.  Maybe you and the council could look into this.  I live in Santa Ynez Valley and work in Santa Barbara, trying to take the commuter  bus and my bicycle whenever the weather and my schedule allows, but with school salaries fixed and no COLA for the past 4 years or so, it’s getting rougher.

Thank you for any light you can shed on this bafflement.

Sincerely,

John Barron

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From: Schneider, Helene

Sent: Wednesday, March 23, 2011 3:45 PM

To: ‘John Barron’

Cc: Armstrong, Jim; ‘Darcel Elliott

Subject: RE: Santa Barbara County Fuel Prices

Mr. Barron –

I share your bafflement and have wondered the same things for many years. I’m including our City Administrator and Assemblymember Williams’ district representative to this e-mail in case they can shed any light to this.

– Helene

Helene Schneider

Santa Barbara Mayor

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From: Armstrong, Jim

Sent: Thursday, March 24, 2011 6:23 PM

To: Schneider, Helene; ‘John Barron’

Cc: Elliott, Darcel

Subject: RE: Santa Barbara County Fuel Prices

Mr. Barron,

I have talked with industy representatives over the years, and the general answer I have received is they set prices based upon the local market.  They compare prices with other stations in the area and set their prices to be competitive with each other. So the only conclusion I can reach is that there is not enough competition in the area to drive prices down.

From a regulatory stand point, at this point no governmental agency regulates their prices.  The only regulation I am aware of is the requirement that they clearly post their prices so the public can see them.

Jim Armstrong

City Administrator

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From: “Elliott, Darcel”

To: “Armstrong, Jim” , “Schneider, Helene”, ‘John Barron’

Date: Tue, 29 Mar 2011 11:21:56 -0700

Subject: RE: Santa Barbara County Fuel Prices

Thanks so much for that explanation Jim. I would just like to reiterate your point that there is no state agency that regulates the price of gas. It is up the individual companies to set their prices so Jim’s explanation of there being a lack of competition to drive the prices down seems accurate. Thanks so much for your inquiry on this matter Mr. Barron. It is certainly an issue of concern for all consumers.

Darcel Elliott

Field Representative

Office of Assemblymember Das Williams

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From: John Barron

Dear Messrs Elliott and Armstrong, and Mayor Schneider,

Maybe I’m being a little self-centered in having purchased a VW turbo diesel last summer when this fuel was about $3.18/gal (now $4.49 in Santa Ynez) but I’m thinking that so much of our economy is based on the price of diesel.  If the Fed is struggling to improve the economy overall might not they use oil company subsidies as an incentive for the performers who can best keep prices down?  It might be a dent in their $30-40 billion quarterly profits but it could directly effect the price of getting goods to market.  This would pertain to supertankers, big rigs and trains, all of whom use this fuel to transport goods.

It would also reward those of us who choose a vehicle which gets 42 mpg as do the new turbo diesels.  Maybe too if the commodities exchanges could remove barrel oil from the list to be privately speculated upon this wouldn’t drive the price up artificially.

I think if this government subsidies alone were threatened (or rewarded based on performance) we would be surprised how much price adjustment these companies actually have.  It’s time we created a framework by which oil companies can be less despised.

Thanks for listening.

=John Barron