WBEZ | BP

Why does Chicago still have such high gas prices?

Fri, 24 May 2013 13:04:00 -0500

It’s Memorial Day weekend, which means more people are hitting the road...and slapping their foreheads when they see the price at the pump. Especially in Chicago.

According to a recent Lundberg Survey the price of a gallon of gasoline in the United States rose sharply in the last two weeks because of outages at Midwest and West Coast refineries

But gas prices in Chicago are often higher than the rest of the country. Higher than New York, Los Angeles — even Hawaii.

But why? Chicago isn’t far from oil-rich Canada and there’s a huge refinery right next door.

Even longtime Chicagoans don’t seem to know why gas is so expensive in the city.

"I don’t know? I think people in high office do what they want and we just have to go with the flow,” said Kuri Roundtree, who pulled into a BP gas station at Roosevelt and Wabash in the South Loop earlier this week. “I think it’s ridiculous. It costs me $70 dollars to fill up my SUV. I’m sure I’m not the only person complaining about this gas. All of my family members hate going to the gas station."

Finding the answer to Chicago’s expensive gas mystery is actually not that obvious.

“Chicago is unique for a few different reasons. Even prices outside our region could be going down while our prices are going up,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.com.

DeHaan says many factors that help set gas prices for the entire country are simply out of our control. For starters, the sky high price of crude oil on the global market. Thanks to demand in Asia, turmoil in the Middle East and good ol’ Mother Nature — like the flooding we experienced earlier this month.

“There’s nothing really to fix,” DeHaan said. “That’s just the way the free market works with gasoline. Prices go up and down.”

Still, if you live in Chicago, it’s usually up.

Another reason for this is the process of refining the crude oil before it gets to the pump.

There are four refineries that generally serve the Chicago market, including BP’s massive refinery in nearby Whiting, Indiana, right across the state border.

The Whiting refinery has been around longer than there have been automobiles. It was part of John D. Rockefeller’s Standard Oil empire in the late 1800s. Of course, it’s more expensive now to refine crude oil than it was back then primarily because of environmental regulations.

You’ve probably heard about the cleaner burning “summer blend” that the Environmental Protection Agency requires for cities like Chicago.

“Summer gasoline, or gasoline with a different RVP, is a different formulation. You can’t use some of your lighter ends, such as your butanes to add to the volume of the gasoline, because it would evaporate out in the higher temperatures so it is more expensive in the summer,” said BP Whiting senior spokesman Scott Dean.

Unfortunately for Chicago’s gas customers, the city’s close proximity to the BP Refinery doesn’t help much in keeping costs down. Dean says that’s not how wholesale pricing works.

“It’s called the rack price,” Dean said. “The rack price is what the tanker truck driver who may be representing any number of companies, will go, will get the fuel, will pay whatever the rack price of what they’ve agreed to. And, the retailer will then determine the final price that they sell on the street.”

Customers may also have a desire to blame gas station owners for the high price of gasoline. But Beth Mosher, spokeswoman for AAA Chicago Motor Club, says it’s not their fault.

“Everybody wants to take it out on their local gas station owner why these prices are so high,” Mosher said. “But the reality is when the prices are this high the profit margins for these gas stations are so thin, they are going to make more from a bag of doritos that they are selling you than they are the gas.”

Mosher says the final factor for high gasoline prices can be pinned on the tax man.

“First and foremost, we have to talk about the high taxes in Chicago,” she said. “About 70 cents on the gallon is what people pay in Chicago for gas taxes, really, really a high number, especially given the statewide average is 49 cents on the gallon.”

Those figures can fluctuate, but that means generally 70 to 90 cents for every gallon of gas pumped in Chicago goes to taxes.

For example, if gas costs $4.67 a gallon that means 18 cents goes to the federal government; 43 cents for the state. And if you live in Chicago, tack on another 33 cents for Cook County and the city.

That includes sales and motor fuel taxes, the latter of which goes to pay for roads and bridges and some of the capital projects.

Although increasingly that money is being diverted to pay for things like pensions.

Another factor that hits wallets particularly hard is the way all levels of government in Illinois levy sales tax on gasoline purchases. The state of Illinois alone charges 6.25 percent sales tax. Twenty years ago when gas was much cheaper that meant just pennies on the dollar. But now that can be an extra 20 cents or more per gallon since the higher the gas price, the more taxes you pay.

“Most states don’t do that. Most states tax only based per unit, per gallon if you will. So, even if the cost goes up, the amount of tax you pay does not go up in terms of your overall cost,” said John Tillman, Chief Executive Officer for the Illinois Policy Institute, based in downtown Chicago.

Last summer, the Institute called for the state sales tax to be changed so it’s based on the number of gallons purchased, and not the price. The proposal fell on deaf ears in Springfield.

Still, if prices aren’t coming down anytime soon, what are drivers supposed to do?

Well, for one thing, we can buy less gas.

“We urge people not to wait for the government to do things but start consolidating your trips and take the L or the Metra train if that’s a possibility to you,” Mosher said. “Do things on your own to start getting better gas mileage out of your car.”

But even if you buy that fuel efficient hybrid or an electric car, drivers still might not be out of the woods when it comes to paying higher gas taxes.

Lawmakers in Springfield are talking about boosting motor fuel taxes to make up the lost revenue from fuel-efficient cars that use less gas. They may even impose fees on the fuel-efficient vehicles themselves to help fund road repairs.

One supporter of this proposal is Doug Whitley, president and CEO of the Illinois Chamber of Commerce.

Whitely is also co-chair of the Transportation for Illinois Coalition which has been in Springfield pushing an increase to Illinois’ motor fuel tax. Although with only one week remaining in the state’s spring schedule, he says most lawmakers are focused on issues like pensions, conceal-carry and same-sex marriage.

“The state’s capital program to fund construction for roads, bridges and transit falls off the cliff next year. That fiscal cliff we heard about in Washington also exists in Springfield,” Whitely told WBEZ this week.

Whitely explained that the state’s fiscal program that started in 2009 will expire in the next fiscal year.

“There’s discussion of how to keep capital dollars flowing to the state and local government and the transit districts so they can continue to build, maintain and modernize and handle their construction needs,” Whitely said.

Whitely said one proposal garnering a lot of attention is the idea of abolishing Illinois’ 19 cent motor fuel tax and establishing a new sales tax on fuels. A similar plan was just implemented in Virginia.

“The motor fuel tax was last increased 23 years ago and there’s no growth in that tax in large part because of the mile-advantages of today’s more fuel efficient cars can take advantage of,” Whitely said. “We already have cars getting 50 miles to the gallon and electric cars, so the motor fuel tax isn’t putting the money into the road fund to support construction.”

Another idea is to levy new taxes or registration fees on hybrids and electric cars directly.

“If you have an electric car, you're really getting away to use the roads but not having to pay much for them,” Whitely said.

Whitely is sympathetic to Chicago area residents who already pay a lot of taxes on gas. “But if you want to continue to have transportation systems that are modern, efficient, clean and safe, there’s going to be a cost related to that,” he said.

“The bottom line is, there is no free lunch.”

Michael Puente is WBEZ's Northwest Indiana bureau reporter. Follow him on Twitter @MikePuenteNews.

First tainted Gulf, now tainted gas for BP

Thu, 30 Aug 2012 09:09:00 -0500

Lead story: Oh, BP. It’s okay. Really. By now, everyone’s forgotten all about that teensy little oopsy-daisy you had in the Gulf of Mexico in 2010. You know, the little spill wherein you dumped an estimated 206 million gallons of crude oil into a delicate ecosystem? Wherein the economic effects linger (but thanks for those ads!) as does the threat of oil churning up every time a hurricane comes by? I mean, sure, it’s understandable you’d be nervous after that. But I wouldn’t worry. No one will get that upset about you selling 4.7 million gallons of tainted gas in Illinois, Indiana and Wisconsin. That’s way less than before! It’s a good thing you’re finding oil in other places, like the Nile Delta. Who needs the Nile Delta anyway? Not Gulf of Mexico wildlife or fuel injectors, am I right?

Also: The defense in the Drew Peterson case has rested, meaning the jury could soon get the case, and then we’d be all done with this thing one way or another, right? Wrong. While Peterson himself will not testify at the trial, depending on how the jury finds, we won’t be done with this thing for a while. A guilty verdict will only mean lenghty appeals. The prosecution's anctis — as well as that hearsay law — give the defense plenty of grist for that fight. A not guilty verdict means the prosecution will up their attempts to peg the Stacy Peterson murder on Drew, too, something that's hard to do without a body. The most fun outcome of all also feels the most likely: a mistrial. Then we get to do this dance all over again.

And then: So now that the Chicago Teachers Union has made their ten-day strike announcement, what comes next? First of all, a lot of tense waiting for parents over the next week. The strike notice means teachers could strike at the end of next week, but it's also a tactic they could use to force the city's hand to fire up negotiations. Said negotiations have been going on since last November. And while it's been 25 years since the last teacher's strike in Chicago, parents are obviously still worried about what they'll do if the strike does happen. Two seemingly movable forces are now primed for a fight that has an endpoint; it's just a matter of who'll blink first.

Farewell: Tennis star Kim Clijsters, who retired from the sport after a loss at the U.S. Open Wednesday. The four-time Grand Slam event winner (three U.S. Open titles, one Australian Open title) knew it'd be her last tournament going in. And while a second-round loss isn't exactly what she had in mind, she walks away one of the great hardcourt players of the last decade.

Elsewhere

Hurricane Isaac moved ashore — slowly — and has weakened to a tropical depression. But the clean-up is just beginning in Southeast Louisiana, where early estimates put the storm’s surge almost on par with that of Katrina.
Paul Ryan had his moment in the spotlight at the GOP convention Wednesday night, accepting the vice presidential nomination while delivering a speech that set fact checkers on fire.
Meanwhile, President Obama proved he’s the nerdy dad we suspected, taking to popular Internet forum Reddit for an AMA (Ask Me Anything) session. It’s pretty great to see a President embracing the Internet like this even if his answers were bland and predictable.
Remember the controversy over opening Wal-Mart stores in Chicago a few years back? Now that they’re springing up across the city, this little animation shows how they’ve spread across the entire country. Watch and try not to think of a plague spreading.
Outer space science continues to amaze as we now know that gravity waves can be seen.

Looking ahead

A Chicago Police officer was shot in the knee while responding to a call last night in Morgan Park; his injuries aren’t life-threatening. It’s a sobering reminder of the number of police officers killed or injured in the line of duty in Chicago in recent years.
Even Alderman aren’t spared during this violent year. James Cappleman (46^th) has reportedly been attacked twice now, most recently by a knife-wielding woman.
Another round of trash pick-up changes has been announced by the city.
File under “good news, maybe?” — you’ll soon be able to buy Powerball tickets online in Illinois.
The biggest will-they-or-won’t-they of the GOP convention: the Reagan hologram. Except it’s not because the “news” is satire.

Sports

A bunch of Notre Dame players have gotten in trouble but Allen Pinkett thinks that can be a good thing because if anything can turn a collegiate sports team around, it’s arrests.
Well, there’s been at least one good thing about the Cubs this year and that’s Darwin Barney’s record-setting defensive performance.
It’s official: the NFL will use replacement refs for at least Week One of the regular season. As if officiating couldn’t get any worse…
The battle between the NHL players union and the league continues as the two sides try to reach an agreement on a new labor deal and sidestep another lockout for the league.
Were juiced balls partially to blame for the explosion of home runs during MLB’s so-called “steroids era”?

Finally

The Daily Show correspondent Samantha Bee absolutely crushes it at the GOP convention.

A lot at stake for BP in Whiting expansion

Fri, 20 Jan 2012 21:32:00 -0600

Just beyond Chicago’s southern border is Whiting, one of the smallest cities in Indiana with about 5,000 residents. But you’d never know it these days. That’s because thousands of construction workers descend upon the “Little City on the Lake” every day to head to the BP Refinery. The facility’s 100 years old now and is getting a multi-billion dollar makeover. There’s a lot at stake for BP’s finances and it’s environmental cred.

Remember when Soldier Field got its fancy makeover? Think about all the work that went into remodeling that stadium. They removed old seats, replaced the field, and put up a new scoreboard.

Now, imagine if all that happened while the Bears were playing and the fans were hooping it up and the tailgaters were in the parking lot. It would have been business as usual, except with dangerous machinery and construction workers all around. Well, that’s pretty much what’s happening at BP’s Whiting Refinery.

MOYE: We’re building the 6th largest refinery in North America inside the 4th largest refinery while it’s actually operating. That brings a lot of complexities to it and makes it a very exciting time.

That’s Dave Moye, BP’s Lakefront complex operation specialist in Whiting.

MOYE: A new refinery hasn’t been built in the U.S. since the 1970s I think. So, this is a significant modification to a refinery.

Moye’s a got a lot to back up that boast. BP’s expansion project will cost $3.8 billion, which makes it the largest private investment in Indiana history. Moye and other BP supervisors already keep track of their own 1,900 employees, but now they’re managing another 9,000 construction workers. And soon ... they’ll manage 1,000 more.

The size and scale of BP’s expansion project is hard to wrap your head around, so to get a better idea of it, I went on a tour. A process engineer named Ryan O’Leary was one of my guides.

O'LEARY: You can tell there’s a tremendous amount of activity around here. Contractors in and out. This is some of the heaviest construction in the area. Just here in our view, six, seven cranes. This will be carrying through in the next year.

O’Leary was quick to show off a lot of engineering muscle that’s gone into this, but he stopped to remind me several times that there’s more at stake for BP than just a makeover, or even short-term profits.

O’LEARY: This project gives us a future in the area that is defined, it is long term. It is a key project for BP’s sustainability in the United States and the world.

This is no exaggeration. BP’s environmental cred has been on the line because of that big oil spill in the Gulf of Mexico in 2010. But you might recall that this modernization project has already attracted environmental scrutiny. Five years ago, BP announced that the Whiting facility would refine a lot more heavy Canadian oil - a stickier, thicker kind of crude.

But when BP sought permits from the state of Indiana, environmental groups and Illinois congressmen stepped in. They worried the plant would release more mercury and ammonia pollution into Lake Michigan. And these critics hit the airwaves with radio ads and other tactics to stop the Whiting project.

BP felt the pressure, so it pledged to keep pollution going into Lake Michigan at current levels, even though the Whiting plant would be bigger and process dirtier oil. That environmental fight was several years ago. Now, the work of keeping BP’s environmental promises comes down to people like Ramachandra Achar, a water treatment specialist.

ACHAR: The mercury issue is a very significant technological challenge though. Much more difficult than any other that we have really faced in the past.

In fact, BP says it’s dedicating about $1 billion to cut down on mercury and other pollutants. That means one of every four dollars in the expansion project is for water treatment.

One reason for the big outlay is that BP is forced to used equipment that’s unique or nearly so. For example, it’s brine treatment unit is the first of its kind to be used in the U.S., and only the second worldwide. BP is also testing merging technologies – technologies that are not fully developed.

It’s getting help from Purdue University Calumet’s Water Institute in Hammond and Argonne National Laboratory in Chicago’s western suburbs. Dr. Cristina Negri researches pollution controls for Argonne. She’s helping to find technologies for BP to lower the amount of mercury that’s released into Lake Michigan.

NEGRI: The problem there is the concentrations are very tiny, very small. The technologies that were available had really were not been tested at those concentrations.

Negri says the nice thing is BP is taking on large-scale real world tests at the refinery. If the mercury pollution controls work, they might help other industries, or even city water treatment facilities release less mercury into the environment.

NEGRI: I think you won’t find anywhere else a study that’s so broad as far as mercury goes. You’re talking between us and Purdue we tested some 40 some technologies. It’s a lot.

Scientists and engineers aren’t the only people interested in whether BP can pull off an expansion, while keeping pollution in check. Envionrmental groups and local residents are, too.

Thomas Frank lives in East Chicago near the Whiting Refinery. Frank says it’s good BP’s spending so much money on environmental controls, but the expansion’s still not worth the risk.

FRANK: It shows there’s a dedication. They are going to try to leverage funds that they know there’s a problem. We have a hundred years of industrial legacy that is meant we are sitting on the most polluted waterway in the country (Indiana Harbor and Ship Canal) , it means our land is considered the most polluted and our airshed is the 9th most polluted in the country. The BP project adds to that complexity and the concentration of industry right here.

Frank’s sentiment is getting heard by BP officials, even ones at the top. Recently, the CEO, Bob Dudley, visited Chicago to talk about BP’s environmental record. It so happens Dudley’s a local guy. He grew up in west suburban Hinsdale, and he’s familiar with Whiting, Indiana.
Dudley took over BP after the Gulf Oil spill of 2010.

DUDLEY: Our reputation was in tatters. We had experienced a massive loss of public trust. We knew we had a responsibility to embed the lessons from this accident across BP worldwide. But in light of what had happened. We’ve committed to reinforcing our safety and risk management procedures globally everywhere.

Dudley told Chicago business people that the Whiting Refinery modernization is one example of how BP wants to get on track with cleaner technology. But, of course, that’s only a prediction right now. The BP refinery project won’t be done until the fall of 2013.

Daniels takes shots at Northwest Indiana, Chicago in new book

Thu, 22 Sep 2011 00:53:00 -0500

Indiana Gov. Mitch Daniels has been successful at politics. So much so that many Republicans wanted him to seek their party’s nomination for president. He declined last spring.

So, there's no acclaim for Daniels as a presidential candidate. But … accomplished author?

That’s still a possibility.

On Tuesday, Daniels released his book, Keeping the Republic: Saving American by Trusting Americans.

The book mostly comprises suggestions of how the U.S. can cure its debt problems. Many of Daniels suggestions cite instances of how he helped Indiana turn around.

But Daniels uses a few pages to take aim at Northwest Indiana, a region that has a decades-long loyalty to the Democratic Party. In one passage, Daniels writes about his futile attempt to make inroads in the region by bringing jobs.

“Culturally close to Chicago in both economics and politics, and with a reputation for governmental corruption and labor union aggression, our northwest corner is a place employers are more likely to flee than invest in,” Daniels writes.

Daniels is also critical of Chicago-area politicians for nearly thwarting the $4 billion expansion at BP’s Refinery in Whiting.

Concerns erupted in 2007 over possible increased pollution into Lake Michigan. Daniels writes environmental regulators on the state and federal level signed off on BP’s plans.

But he said that didn’t stop Chicago politicians from criticizing the plan.

“Even though the new plant would produce less pollution than the previous one, even though our environmental agency had meticulously dotted every ‘i’ in issuing the necessary permits, and even though the federal EPA had then approved the issuances, all hell broke loose,” Daniels writes. “Chicago politicians of both parties began competing to see who could do the best Green Preen, who could bluster the loudest and act the toughest with BP and with Indiana. With a blindfold on, you could tell from their rhetoric that these people were from Chicago.”

Daniels writes that had the project been planned for Illinois, similar fallout would not have happened.

“Hypocrisy was not an obstacle. If the jobs had been on the Illinois side of the border, you can bet the press would have come to a different conclusion,” Daniels writes. “The City of Chicago was (and is) depositing fifty times more ammonia into the water than the BP expansion would. Ammonia does no harm, by the way; fish excrete it, too, and it biodegrades quickly, but why let ninth-grade science get in the way of a hot press release? The BP plant emissions would be way under the EPA’s allowable limits, which are always set with a gigantic margin of safety to start with.”

Daniels says BP made some costly — but “environmentally meaningless” — changes to the project, which continues today.

Daniels is making the rounds to promote his new book, making stops throughout Indiana, but so far not in Northwest Indiana.

A guide to the many inquiries into the BP oil spill

Wed, 15 Dec 2010 16:01:00 -0600

It can be confusing to keep track of all the groups investigating the BP oil spill in the Gulf of Mexico.

For example, the U.S. Chemical Safety Board is holding a public hearing on the disaster Wednesday, looking at how other countries regulate offshore drilling. And its investigation is one of at least five government inquiries into the Deepwater Horizon explosion and spill.

So you can imagine how Michael Bromwich, the country's chief offshore regulator, feels.

"I didn't design the world of many investigations, but I have to deal with it," says Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement.

Bromwich's agency is conducting a joint investigation with the Coast Guard. Like all the government investigations, the goal is to learn what caused the disaster, and how to prevent similar ones in the future. But each of the agencies have weaknesses that leave room for others to come in and argue they could do a better job.

President's Oil Spill Commission

This is the highest-profile investigation. It's expected to be the first to release its final report, next month.

While the commission is billed as bipartisan, it's clear the oil industry feels under-represented on it: The panel is dominated by those concerned more with the environment than making money by drilling for oil.

Some oil industry insiders will talk about their concerns off the record, but not openly. Dan Kish, senior vice president of the free-market Institute for Energy Research, thinks he knows why.

"When a cop pulls you over, you can present your papers and be nice," Kish says, "or you can start swearing at the policeman and wait for the ticket to be issued."

Oil companies don't have much to gain by complaining about the makeup of the presidential commission, Kish says. But he thinks it's surprising there are no technical experts from the oil industry on it.

Environmentalists say that would be like giving a defendant a seat on the jury.

"I think their argument is emblematic of the coziness that they might like to have with their regulators," says Jackie Savitz, senior scientist and campaign director with Oceana, "and a type of relationship that they seem to have had in the past, which may have led to some of the problems that we're beginning to understand."

Even if the commission members themselves don't, for the most part, have close ties to the oil industry, Savitz says that it's clear the commission's staff has been working closely with the industry.

Coast Guard/Bureau of Ocean Energy Management

This is another high-profile investigation, but some have questioned whether the Coast Guard and Bromwich's Bureau of Ocean Energy Management can be self-critical enough. Both agencies played roles in regulating the companies involved and in responding to the Deepwater Horizon incident.

"People will be able to see from the report whether we are tough on our own people or not," Bromwich says. "I believe that organizations have the capacity to investigate themselves."

The report from the Coast Guard/BOEM investigation is due in April, right around the one-year anniversary of the Deepwater Horizon blowout and oil spill.

National Academy of Engineering

The Department of the Interior also has asked this group to conduct its own independent investigation.

An interim report released in November concluded the crew aboard the Deepwater Horizon missed signs that there were problems. A final report is due in June.

U.S. Chemical Safety Board

This investigation has been the most controversial. The BOEM and some in the oil industry argue that deepwater oil spills just don't fall into the types of industrial chemical accidents the CSB is supposed to investigate. Differences appear to have been smoothed over for now, though the issue could still end up in court.

Some think the CSB's investigation could be valuable because the board has a lot of independence.

"Their board members are appointed to five-year terms, so they cross different administrations," says Lois Epstein, Arctic program director for The Wilderness Society.

Epstein says the CSB has significant technical expertise and experience looking at a company's safety culture. "A lot of their credibility is based on their reputation and their previous work," she says.

Other Inquiries

The Department of Justice also is investigating, in case there's reason to bring criminal charges. And Congress has various inquiries open.