Nevada gas prices still above national average

Friday, Aug. 9, 1996 | 11:59 a.m.

CARSON CITY -- Attorney General Frankie Sue Del Papa says an investigation shows Nevadans may be paying high gasoline prices to help finance the production of cleaner fuel required in California.

Del Papa said Thursday the report showed factors outside Nevada have kept the price of gasoline in this state above the national average. While the price of crude oil and refined products have dropped to January levels, the wholesale price charged Nevada gas stations remained 30 cents above the January figure.

Nevada gas stations, she said, did not realize any increased profit between January and April. They did see a moderate increase from April to June but Del Papa said there was "no evidence of price collusion among Nevada retailers" that were examined.

Del Papa and Gov. Bob Miller twice demanded explanations from the major oil companies why Nevada's prices, especially in Reno, led the nation.

Her investigation, Del Papa said, found that the limited capacity of the pipelines into Nevada from California caused a limited supply and resulted in higher gas prices. And there's been a decline in gasoline from "non-branded" retailers who left the market rather than change over to make the cleaner fuel required by California.

Nevada gets most of its gasoline from California. In the neighboring state, refiners had to spend about $4 billion to produce the cleaner gas. And that reduced the supply of the regular gas that goes to Nevada.

"Environmental costs imposed on the California refineries appear to be passed through to Nevada consumers," the attorney general said. ARCO, a major refiner, has denied the charge. But Del Papa said, "Continued high wholesale prices to Nevada buyers and the substantial increased second quarter earnings reported by all the major refineries seem to make that denial suspect."

The cost of the cleaner gas in California is about 12 cents a gallon. The investigation showed that gasoline, before taxes, in Sacramento sold for 1 or 2 cents cheaper than in Reno in May and June, despite the fact that pipeline transportation to Nevada adds about 35 cents per gallon.

"This comparison strongly suggests that Nevada is in fact paying for cleaner air in California," the attorney general said. "Similarly, retail prices in Las Vegas were about three cents lower than in Los Angeles during that period."

The gasoline from California is shipped by pipeline to Nevada. And these have proven to be inadequate supply systems. For instance, the recent transfer of the Top Gun activities to the Naval Air Station in Fallon increased the demand for gas. And therefore the short supply leads to higher prices.

Del Papa also referred to ARCO's "aggressive marketing strategy ... to undercut competition, with the result that independent stores either close or become affiliated with a particular brand." She said ARCO has been sued several times for predatory pricing activities but the competitors have never won.

"The combined effect of a captive market, high priced supply, the high cost of California's 'new cleaner fuel' and limited competition may explain why gasoline was $1.229 per gallon in June in Denver and $1.575 in Reno and $1.477 in Las Vegas," Del Papa said.

"Colorado refineries are closer to their markets, environmental regulation may be less rigorous and the independent retail outlets are numerous," she said. Las Vegas gas prices are typically about 10 cents lower than Reno's, she said.

The results of her investigation will be turned over to U.S. Attorney General Janet Reno and California Attorney General Dan Lungren, who are conducting in-depth inquiries into the gas pricing.

"It is my hope that they will use these findings to supplement their audit and help bring to light any additional unique market conditions that may adversely affect Nevada motorists," Del Papa said.

She said her investigation included interviews with representatives from major oil companies and gasoline marketing associations, a review of financial records of nine gasoline retailers in Nevada and information from the federal and California state governments.