Question of the Month: What factors affect fuel prices?
When gasoline and diesel prices spike, we often want to blame someone for our pain at the pump. The reality is that the oil industry is a complex market. Though there are numerous factors that could ultimately influence the price of fuel, such as weather, government policies, and international relations, there are four factors that have the most significant influence. These factors include the cost of crude oil, refining costs and profits, distribution and marketing costs, and fuel taxes. Alternative fuels, such as natural gas, propane, electricity, and biofuels, can mitigate some price fluctuations attributable to short-term events, like natural disasters, because they diversify the fuel supply; however, some alternative fuel prices are also dependent on similar factors.
In May 2015, the average retail price of regular grade gasoline was $2.72, according to the Energy Information Administration (EIA). Below is a summary of the factors that affect gasoline prices, and the relative percentage of each component. We have also described how each of these factors may affect alternative fuel prices.
As of May, approximately 51% of the cost of gasoline was related to the price of crude oil. The fluctuation in crude oil price is the biggest factor in the volatility of the price of gasoline, as the other costs (described blow) are relatively static.
Crude oil prices are largely a product of supply and demand. Global demand has grown in recent years due to world economic growth and increased access to vehicles, particularly in developing nations. The Organization of Petroleum Exporting Countries (OPEC), which produced about 40% of the world’s crude oil between 2000 and 2014, also has significant influence on oil prices by setting production limits among members. Part of the reason oil prices have declined significantly since July 2014 is that OPEC nations are not limiting production, resulting in a global ‘glut’ of crude oil. Much of this glut stems from a surge in oil production in the United States and Canada over the last few years from unconventional sources, like shale. This price could change dramatically, however, if there is a major global supply disruption.
With the exception of electricity and natural gas, alternative fuel prices can also be impacted by the price of crude oil and the price and demand for petroleum products. Higher or lower demand for gasoline also influences ethanol demand, for example, and ethanol is closely linked to the price of gasoline, as shown in the Clean Cities Alternative Fuel Price Report. Biodiesel wholesale costs are largely influenced by the price of diesel. Propane costs historically tend to follow crude oil prices, though not to the same extent as other fuels, and change seasonally because of the demand for propane as heating fuel in the winter.
Alternative fuel prices are also affected by the applicable commodity price, though the impact varies by fuel. For example, the price of natural gas only comprises 20% of the compressed natural gas (CNG) price at the pump, according to the American Gas Association (AGA). Because the natural gas is a relatively small percentage of the overall fuel price, a swing in the natural gas commodity prices has less of an effect on the CNG price at the pump. In addition, natural gas costs are typically regulated and less expensive than petroleum (on a gasoline gallon equivalent, or GGE, basis) and the infrastructure is independent of oil infrastructure.
Refining Costs and Profits
Crude oil must be refined into gasoline and diesel so it is compatible with our vehicles. Refining oil takes energy and costs may vary based on the type and origin of the crude oil used in the process. In May, refinery costs and profits represented about 22% of the cost of a gallon of gasoline.
Alternative fuels, such as propane, natural gas, and biofuels, are also “refined” or otherwise altered before they can be used in vehicles. Propane is a by-product of crude oil refining and is also produced as a liquid from natural gas and oil wells. Propane from natural gas liquids does not require refining; however, it must go through a scrubbing process to remove contaminants, as well as a separation process. Natural gas is produced from natural gas and oil wells, and is also subject to a separation and treatment process to remove contaminants. It must also be compressed in order to be transported in major distribution pipelines. Biofuel production facilities are often called ‘biorefineries’ because they produce and refine crude biofuels at the same location.
Distribution and Marketing
Since many of us do not live next to oil refineries, gasoline and diesel must be transported to local fueling stations first through a sophisticated system of pipelines, trucks, or barges to a network of fuel terminals, which can also be referred to as a distribution rack. The distributors, also called jobbers, load and blend the gasoline and diesel with other products (e.g., ethanol, biodiesel) in tanker trucks, which is driven to your local retail outlets and placed in underground storage tanks. In every part of the supply chain there are costs associated with employee salaries and benefits, equipment, taxes, insurance, and other types of overhead. In May, these resulting costs equaled about 10% of the price of a gallon of gasoline.
Finally, motor fuel taxes contribute to the construction and maintenance of the roads we use on a regular basis. In the early 1900s, state governments devised ways to collect taxes on each gallon of fuel to help cover these costs and increase revenue. In May, federal, state, and local taxes accounted for 17% of the average retail price of a gallon of gasoline. Federal excise taxes are currently $0.184 per gallon of gasoline or ethanol and $0.244 per gallon of diesel or biodiesel. Propane and CNG are taxed at $0.183 per gallon of propane or GGE of CNG, and liquefied natural gas is taxed at $0.243 per gallon. The September Question of the Month will delve into this topic in more detail.
State and local fuel taxes vary widely by jurisdiction. Though motor fuel taxes are applied to each gallon of gasoline or diesel sold, alternative fuels can also be taxed on an energy equivalent basis with gasoline and/or diesel. Some states use alternatives to traditional state fuel taxes, such as annual fees for alternative fuel vehicles or taxes based on the number of miles traveled. Look for the August Question of the Month for more information on these alternatives.
Though the alternative fuel supply chain differs slightly from conventional fuels, many of the same factors influencing oil prices also impact alternative fuels. Now when you fill up your vehicle, take a moment to think about all the infrastructure and people required to process and deliver fuel from the field to the pump.
For more information on fuel prices, please refer to the following websites:
- EIA’s Factors Affecting Gasoline Prices (http://www.eia.gov/energyexplained/index.cfm?page=gasoline_factors_affecting_prices)
- EIA’s Gasoline and Diesel Fuel Update (http://www.eia.gov/petroleum/gasdiesel/)
- Clean Cities’ Alternative Fuel Price Report (http://www.afdc.energy.gov/fuels/prices.html)
- U.S. Internal Revenue Service (IRS)’s Quarterly Federal Excise Tax Return, Form 720 (http://www.irs.gov/pub/irs-pdf/f720.pdf)
- AGA’s 2015 Playbook (https://www.aga.org/playbook)
U.S. House Passes Highway Bill with Alt-Fuel Tax Parity Provision
On Wednesday, the U.S. House of Representatives passed a highway and transportation funding bill that includes a provision meant to help level the playing field for how certain alternative fuels are taxed in relation to conventional fuels. H.R.3038, legislation to fund and extend the authorization for the country's highway and transit programs through the end of 2015, passed the House in a 312-119 vote.
To read the full story, click here.
Find information about laws and incentives, fueling stations, vehicles, fuel prices, and more.
Have you ever pored over Internet search results on a quest to find information about alternative fuels and advanced vehicles in your state—only to end up frustrated or confused?
Now you can kiss those futile hours spent goodbye, thanks to the revamped State Information pages on the Alternative Fuels Data Center (AFDC). Simply select which state you would like to find transportation data for, and you will be presented with information about laws and incentives, fueling stations, vehicles, fuel prices, and more—all in one easily accessible place.
The AFDC's State pages aggregate many different sources of credible data (including the U.S. Energy Information Administration and R. L. Polk & Co.), and are a launching point for state-specific success stories presented through short videos and online case studies. The pages also allow you to quickly identify alternative transportation projects happening around the state, locate your nearest Clean Cities coalition, and find other reliable resources.
Try it for yourself and get the scoop on your state now!
Question of the Month: What are the lates updates on hydrogen and fuel cell electric vehicle deployment?
Answer: Fuel cell electric vehicles have been around for a while, mostly in limited quantities and locations through demonstration projects. But these vehicles, with thier potential to significantly cut petroleum consumption and reduce emissions, are starting to make their way into dealerships and onto roads across the country. Though the market for FCEWs is still in its infancy, many government organizations and private companies are working on research and deployment efforts to make hydrogen a widespread, viable, affordable, and salfe alternative vehicle fuel.
Below are some of the recent activities related to FCEV commercialization:
FCEVs are beginning to enter the consumer market in certain regions in the United States and around the world. Hyundai introduced the 2015 Tuscon Fuel Cell in California last year for lease, and Toyota Motor Company announced they will release the 2016 Mirai for sale this October at eight California dealerships that were specially selected for their experience with alternative fuels and their proximity to existing hydrogen fueling stations. Vehicle original equipment manufacturers (OEMs) such as BMQ, Ford, General Motors, Honda, Mercedes/Daimler, Nissan, and Volkswagen are expecting to launch FCEV production vehicles in select regions of the country in the coming years. Other automakers continue to introduce their FCEVs through demonstratoin projects. The FCEV market is also growing for buses, ground support equipment, medium- and heavy-duty vehicles, back-up power, prime power applications, and continues to be strong for forklifts.
While OEMs are offering affordable lease options, some of which include the cost of fuel, FCEVs are still expensive. However, production costs have decreased significantly in recent years and FCEVs are expected to be cost-competitive with conventional vehicles in the coming years.
Hydrogen Fueling Infrastructure
As the FCEV market expands, hydrogen fueling infrastructure will need to grow to match demand. Most of the hydrogen stations available today have been built to support OEM FCEV demonstration projects. According to the Alternative Fuels Data Center’s (AFDC) Alternative Fueling Station Locator (http://www.afdc.energy.gov/fuels/hydrogen_locations.html), there are 12 publicly accessible hydrogen stations in the United States, with many more in the planning stages. According to the California Fuel Cell Partnership (http://cafcp.org/), there are 49 more stations in development in California that will be publically available. Development efforts are also underway in Connecticut, Hawaii, Maine, Massachusetts, New Jersey, New York, Rhode Island, and Vermont.
Like the vehicles, the high cost of fueling equipment remains a key challenge. Hydrogen station costs can vary significantly based on hydrogen feedstock, station capacity, utilization, proximity to production, and available incentives. The National Renewable Energy Laboratory’s (NREL) Hydrogen Station Cost Calculator estimates that stations can cost between $2 and $5 million. However, like FCEVs, as the demand grows, the cost of hydrogen fueling equipment will decrease and the number of stations will increase.
Codes, Standards, and Incentives
The widespread deployment of FCEVs and the associated network of hydrogen fueling stations requires the development, maintenance, and harmonization of codes, standards, and regulations to keep up with the technology. These efforts are ongoing and are supported by the U.S. Department of Energy (DOE), as well as domestic and international organizations.
Incentives will also continue to be important to promote and maintain a market for hydrogen and FCEVs. California is leading in the number of relevant state incentives. For instance, to meet the objectives of California’s Zero Emission Vehicle (ZEV) Program, the California Energy Commission’s Alternative and Renewable Fuel and Vehicle Technology Program (http://www.energy.ca.gov/drive/) is allocating $20 million annually for the construction of at least 100 public hydrogen stations in California by January 1, 2024. In addition, California’s Clean Vehicle Rebate Project offers up to $5,000 for the purchase or lease of approved FCEVs (http://energycenter.org/clean-vehicle-rebate-project). Nine other states (Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Vermont) have also adopted California’s ZEV mandate to increase the number of ZEVs, including FCEVs, on the roads.
Ongoing Research and Development
Significant research and development efforts by DOE, the national laboratories, and other H2USA partners have brought the hydrogen industry to where it is today (http://energy.gov/eere/fuelcells/accomplishments-and-progress). Through their Fuel Cell Technologies Office (http://energy.gov/eere/fuelcells/fuel-cell-technologies-office), DOE continues to support research in the areas of hydrogen production, delivery, and storage, as well as technology validation, manufacturing, and market transformation.
- AFDC’s Hydrogen page (http://www.afdc.energy.gov/fuels/hydrogen.html) provides basic information on hydrogen, FCEVs, and the associated infrastructure.
- AFDC’s Alternative Fuel and Advanced Vehicle Search (http://www.afdc.energy.gov/vehicles/search/) allows users to look for available FCEVs.
- H2USA, a public-private partnership to promote hydrogen and FCEV commercialization and adoption, maintains a FCEV page (http://h2usa.org/fuel-cell-electric-vehicles).
- NREL’s Fuel Cell and Hydrogen Technology Validation page (http://www.nrel.gov/hydrogen/proj_tech_validation.html) includes evaluation and performance review data on various FCEVs in a real-world setting, as well as hydrogen station performance, maintenance, cost, and safety data.
- NREL’s report, Hydrogen Station Cost Estimates (http://www.nrel.gov/docs/fy13osti/56412.pdf) outlines the costs associated with hydrogen fueling stations.
- Argonne National Laboratory’s Hydrogen Refueling Station Analysis Model (HRSAM; http://hydrogen.energy.gov/h2a_delivery.html) can be used to calculate the cost of hydrogen stations.
- NREL’s Hydrogen Financial Analysis Scenario Tool (H2FAST; http://www.nrel.gov/hydrogen/h2fast/) can also provide useful information on the cost of hydrogen stations.
- DOE’s website (http://energy.gov/eere/fuelcells/safety-codes-and-standards) covers relevant safety, codes, and standards.
- AFDC’s Hydrogen Laws and Incentives page (http://www.afdc.energy.gov/fuels/laws/HY) is a searchable tool with information on state regulations and incentives pertaining to hydrogen.
Agility Fuel Systems, in it's partnership with Freightliner Trucks, recently announced the opening of a new manufacturing plant in Salisbuy, NC, which is in close proximity to the Freightliner manufacturing facilities in Cleveland, NC, and Mt. Holly, NC, where the Freightliner Cascadia 113, M2 112, and 114SD natural gas trucks are produced. The new Agility plant is expected to commence production later this year.
Click here to read the full article.
The U.S. Environmental Protection Agency (EPA), under President Obama, reduced the required levels of ethanol that must be blednded into gasoline. Members of both the Senate and the House of Representatives have also introduced separate bills in order to end the federal ethanol blending mandate. Despite the Obama adminstration's reduction in ethanol blending requirements, the EPA raised future biofuel totals.
Click here to read more.
The U.S. Department of Agriculture plans to spend $100 million on an initiative to double the number of higher-ethanol blend fuel pumps in the U.S. The Biofuels Infrastructure Partnership would provide grants to boost states' research into renewable fuel, including E15 and E85. However, economist Scott Irwin said the program may have little impact because the Environmental Protection Agency's recently announced ethanol mandates are too low to prompt changes from refiners and service stations.
To read the full article, click here.
In 2007, Mecklenburg County Air Quality initiated an air pollution control program called Grants to Replace Aging Diesel Engines or GRADE. GRADE is designed to reduce oxides of nitrogen (NOx), an ozone forming air pollutant, by providing businesses and organizations funding incentives to replace or repower heavy-duty non-road equipment with newer, cleaner, less polluting engines. Since 2007, GRADE has funded 283 projects and awarded $5.13 million. These projects have reduced 432 tons of ozone-forming NOx in the Charlotte region.
$500,000 is now available in reimbursements! This round of funding is specifically for publicaly and privately owned facilities that accept solid waste like:
- municipal solid waste
- construction and demolition debris
- land clearing and inert debris
- yard waste
Due Date: June 30, 2015
Eligible Projects: Equipment replacement or Equipment repower
Evaluation Based on:
- Amount of nitrogen oxido pollution reduced
- Cost per pound of nitrogen oxide pollution reduced
- Amount of time spent in eligible region
- Equipment Replacement- Up to 25% of cost
- Equipment Repower- Up to 40% of cost
For more information, click HERE.
Please be in touch with CCFC staff:
- Jason Wager 704.348.2707 jwager [at] centralina [dot] org;
- Jessica Hill 704.3474710 jhill [at] centralina [dot] org;
- Erika Ruane 704.688.6508 eruane [at] centralina [dot] org
if you have ideas related to this opportunity for projects in the Greater Charlotte Region.
Question of the Month: How can I improve my gas mileage while driving this summer?
Answer: Whether you are taking a summer road trip or just running errands around town, there are things you can do to improve your fuel economy and save money on fuel in the summertime.
You may notice an increase in your fuel economy as the weather gets warmer. This is because vehicle engines, transmissions and other components take less time to warm up and summer gasoline blends can have slightly more energy per gallon than winter blends. However, if you use your air conditioning (AC) a lot or drive with the windows down, you might actually see your fuel economy drop.
AC is the main contributor to reduced fuel economy in the summertime. In fact, using the AC can reduce a conventional vehicle’s fuel economy by as much as 25%, or even more if you are driving a plug-in electric vehicle (PEV). Driving with the windows down can also reduce fuel economy due to greater aerodynamic drag (wind resistance) on the vehicle. Though this has a small effect on fuel economy, aerodynamic drag is more apparent when driving at the highway speeds typical for road trips.
The following tips can help you use the AC more efficiently and therefore improve fuel economy in the summer:
- Read the owner’s manual for detailed information on how your vehicle’s AC system works and how to use it efficiently.
- Park your vehicle in shady areas or use a sunshade to keep the interior from getting too hot.
- Do not use the AC more than needed. If you need to use the AC, avoid using the “max” setting for extended periods.
- If you are driving at high speeds, use the AC instead of rolling down the windows. If the vehicle is too hot, you may lower the car windows to expel hot air for the first few minutes. Once the hot air has left the vehicle, switch to using the AC.
- Avoid excessive idling. Idling can use a quarter to half a gallon of fuel per hour, and more if the AC is on. Do not idle the vehicle to cool it down before a trip; most AC systems actually cool the vehicle faster while driving.
- PEV owners, pre-cool your vehicle with the AC while still plugged in. Since PEVs use battery power to provide AC, it can drain the vehicle’s batteries and reduce the vehicle’s overall range. If you need to use the AC to cool down your PEV, try to do so while the vehicle is still charging.
The following tips should be used year-round to improve fuel economy:
- Use cruise control while driving on highways to maintain a consistent speed and conserve fuel.
- Remove any unnecessary weight from the vehicle. Vehicles with heavier loads tend to have reduced fuel economy. An additional 100 pounds in your vehicle can reduce fuel economy by 1%.
- Avoid transporting cargo on the rooftop of the vehicle. Traveling with cargo on the roof increases wind resistance and can significantly lower your fuel economy. Rear-mounted cargo has a much smaller effect on fuel economy than rooftop cargo.
- Avoid aggressive driving. Aggressive driving (speeding, quick acceleration and heavy braking) can reduce fuel economy by as much as 33% at highway speeds and 5% at city speeds. This informational video shows real-world effects of aggressive driving on fuel economy: https://www.youtube.com/watch?v=4zWXwqqqHm0.
- Ensure your tires are properly inflated. Tires that are not inflated to the proper pressure can reduce fuel economy by 0.3% for every one pound per square inch (PSI) drop in pressure in all of the tires. Having your tires inflated to the proper pressure is also safer and can help tires last longer.
- Pay attention to the speed limit. Not only is this a safe practice, but gas mileage tends to decrease when driving at speeds above 50 miles per hour.
For more information on how to improve your fuel economy, please refer to the following FuelEconomy.gov websites:
- Fuel Economy in Hot Weather - http://www.fueleconomy.gov/feg/hotweather.shtml
- Gas Mileage Tips - http://www.fueleconomy.gov/feg/drive.shtml
- Keeping Your Vehicle in Shape - http://www.fueleconomy.gov/feg/maintain.jsp.
Clean Cities Technical Response Service Team
technicalresponse [at] icfi [dot] com
The 2015 Clean Cities Region of Excellence Award is presented to the City of Concord for demonstrating leadership and excellence in clean transportation and fuel activities. Concord has recognized the environmental, economic, and national security benefits of reducing consumption of fossil fuels and has implemented programs and initiatives to lower their use of traditional transportation fuels. Through the Clean Fuels Advanced Technology (CFAT) grant, the City of Concord installed six publicly accessible Electric Vehicle charging stations throughout the City and two Ford Focus all-electric vehicles to replace older gasoline powered cars for City employee use. They also purchased a neighborhood electric vehicle (NEV) called the Firefly for their downtown parking enforcement officer to use.
Concord’s desire to decrease their dependence on petroleum goes beyond alternative fuels. They have decreased their fuel usage for the past five consecutive years, even though they have increased miles-traveled due to growth. This is due to right-sizing their fleet, keeping the vehicles young and fuel efficient, and other out-of-the-box techniques. One such technique is using smaller scout vehicles to locate yard waste and bulky pick-up materials at the curb and track the locations using a GPS. This allows the larger, less fuel-efficient trucks to go directly to these pick-up locations without wasting fuel traveling around the entire city. Concord has also implemented a customer service center in the Police Department to take routine police reports over the phone, negating the need to dispatch an officer to take them.
A congratulations and a thank you goes out to long time active Centralina Clean Fuels Coalition stakeholder, the City of Concord, for taking big steps forward in reducing petroleum dependence in unique ways that reduce costs and improve quality of life for their community.
A separate committee reviewed and selected the winner of the 2015 Clean Cities Region of Excellence Award. This committee included: Marcie Smith, CCFC Stakeholder (Gaston County Public Works), Megan Green, CCFC Stakeholder (Mecklenburg County Air Quality), and Dave Navey, CCFC Chair (Duke Energy). The Clean Fuels Coalition appreciates the work of this committee and thanks them for their time and participation in the awards program.
The CCFC would also like to recognize the runners-up, ReVenture Park and the Town of Matthews for the great work they're doing to reduce pertoleum dependence in the region!