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April 17, 2012 > Reduced gasoline consumption as prices soar

Reduced gasoline consumption as prices soar

Submitted By BOE

California gasoline prices rose by 23 percent in 2011 to an average of $3.86 per gallon as consumer consumption dropped 1.8 percent, according to a report released on March 30, 2012 by Betty T. Yee, First District Member of the California State Board of Equalization (BOE).

"Many Californians are struggling with the increasing cost of gasoline and seek ways to reduce their consumption such as driving more economical vehicles or using alternative modes of transportation," said Yee.

Diesel fuel prices in California increased by 25 percent in the fourth quarter of 2011 to $4.13 per gallon as consumption grew by 2.3 percent. According to the BOE Economic Perspective, commercial trucks account for the bulk of diesel fuel purchases in California. The diesel market is affected by the economy, imports and exports through California ports, and supply and demand conditions in residential and non-residential construction and agriculture.

Gasoline consumption began to decline in 2005 and has continued as consumers, struggling with high prices, take steps to reduce their gasoline purchases, including driving fuel-efficient and hybrid vehicles and taking alternative forms of transportation such as buses, light rail and trains. California is a leader in promoting these methods to support conservation and reduce dependence on foreign oil. Additionally, consumers may be using less gasoline because of the national fuel economy standards that have increased the miles-per-gallon required for new cars.

The recession and high unemployment rates have reduced the number of drivers on the highways and the number of long commutes and contributed to lower gasoline consumption in California.

The fourth quarter of 2011 saw the national average price of a gallon of gasoline rise by 17 percent to $3.43, while diesel prices increased 23 percent to $3.87. According to the Energy Information Administration, the cost of crude oil, which is set on the world market, determines about 72 percent of the price of gasoline. Some energy experts agree that the way to reduce gasoline price spikes is to decrease the dependence on oil, regardless of where the oil is sourced.

According to energy economist Severin Borenstein, with U.C. Berkeley's Haas School of Business, oil prices drive gasoline prices and current oil prices are high. Global factors, such as high demand in India, China and elsewhere in the developing world, largely determine the price of oil. Consequently, Californians' reduced consumption has only a minor impact on worldwide demand. Similarly, U.S. oil production has only a small impact on the world supply; output increased by 13 percent between 2008 and 2011 but still accounts for less than 10 percent of global production.

California gasoline and diesel fuel figures are net consumption, including audit assessments, refunds, amended and late tax returns and the State Controller's Office refunds. BOE is able to monitor gallons through tax receipts paid by fuel distributors in California. BOE updates the fuel reports at the end of each month.

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