Monday column - Gas prices are low, you’re allowed to stop complaining

December 2nd, 2008 at 04:08pm Thomas V. Bona

Anyone out there still believe gas prices won’t come back down? Because we haven’t seen prices this low in Rockford since early 2005. Back then, Green Day’s “American Idiot” was the top album in the country. OK, when I put it that way, it doesn’t seem so long ago. When adjusted for inflation, prices are lower then they’ve been since early 2004 (Top album would have been something like OutKast’s “Speakerboxxx/The Love Below” … Hey ya, indeed!).

We’ve had an unprecedented drop in the price of gas — more than half. In comparison, the average price of gas went from about $1.40 a gallon in 1981 to 90 cents in 1986. Yet people still find reason to complain. The most common is “why are we higher than the national and state averages?” I want to say, “Well, they’re averages, so somebody has to be above them, just like somebody has to be below them.” But that’s oversimplified, and when it comes to gas prices I try my best to, er, undersimplify things.

Now that prices have normalized from this summer’s insane peaks, you’re seeing pretty standard gaps in pricing around the state and the country. They all have to do with geography — the closer you are to refineries, the lower your taxes are and the lower the cost of doing business is, the lower gas prices will be, generally. First, look at things nationally. On Friday, Illinois’ average was $1.82 a gallon, according to AAA’s fuelgaugereport.com. That made it the 27th-highest state in the nation. We’re right in the middle, which is actually rare for us, we’re usually a bit higher.

If you look at one of the national gas temperature maps out there, you’ll see that generally the farther away from the Gulf Coast states are the higher their gas prices are. That’s because half of the nation’s refining capacity is on the Gulf. Taxes are another big factor — Illinois has some of the highest fuel taxes in the nation, though it’s come down a bit because our sales tax is a percentage, so the lower fuel prices are the lower that tax is.

But what about within Illinois, you ask? Why is the Rockford area — $1.87 on Friday — more expensive than Champaign-Urbana ($1.61), Peoria ($1.659), Springfield ($1.77) and most of downstate? Again, geography. Illinois itself only has about 5 percent of the nation’s refining capacity, and more than half of that is way downstate. The refineries in Chicagoland primarily serve Chicagoland, so we get a lot of stuff from south of here. Also, sales tax in Rockford and Machesney Park are generally 2 percentage points higher than in much of downstate. Finally, it simply costs more to do business in bigger cities. Employees make more, property costs more, insurance costs more, etc. Rockford is still the second-largest metro area in Illinois, so the fact that we’re usually the second- or third-highest metro area in the state makes perfect sense to me. It simply costs more to run a station in Rockford than in Peoria.

Don’t believe me? Try opening one yourself. Or ask the major oil companies why they’ve sold all theirs. There are simpler ways to make money. And simpler things to explain. I think I’ll try astrophysics next. Contact staff writer Thomas V. Bona at tbona@rrstar.com or 815-987-1343.

Entry Filed under: Fuel price musings