Slide 7 of 10

Notes:

• While my agency cannot be expert in every local gasoline market in the United States, we are familiar with a number of factors that can account for significant differences in prices between markets:
  • Proximity of supply - distance from the refineries supplying the local market. Additionally, the proximity of those refineries to crude oil supplies can be a factor, as well as shipping logistics, including pipeline or waterborne, from refinery to market.
  • Cost of supply - including crude oil, refinery operating, and transportation costs.
  • Supply/demand balance - some regions are typically in excess or short supply, while others may vary seasonally, or when supply interruptions (such as refinery shutdowns) occur.
  • Competitive environment - including the number of suppliers, and the degree of local market dominance by one or a few, as well as diversity of supply sources and barriers to entry.
  • Local demographics - such as population density, per-capita income, station density, number of vehicles, etc.
  • Operating costs - including station rents, local wage rates, tax burden, etc.
  • Taxes - per-gallon, such as excise taxes, and percentage, such as sales taxes, added to the consumer’s cost of gasoline.
  • Environmental programs - including oxygenated (as here in El Paso), reformulated, and low-volatility gasolines, and restrictions on transportation or storage.