Gas costs less on East Side, study says

OLYMPIA – Take heart, Spokane and Eastern Washington. When it comes to cheap gas bragging rights in Washington, you’re losing some battles but winning the war.

After months of number-crunching, the findings of a new state gas-price study released by Attorney General Rob McKenna on Thursday include this startling sentence:

Among Washington’s 39 counties this year, “Spokane County has the lowest average retail prices, more than 14 cents per gallon below the state average.”

In fact, the 10 counties with the lowest average retail gas prices in 2007 are all in Eastern Washington.

“Of these, the lowest prices were found in the counties bordering Idaho – Asotin, Whitman, Spokane and Pend Oreille,” says the 70-page report, compiled by state officials and University of Washington economist Keith Leffler.

The highest average prices in the state? In Western Washington, particularly in Bellevue, Bellingham and island-heavy San Juan County.

The last time the state did a study like this – a 1991 report by the Department of Community, Trade and Economic Development – it found that gas prices tended to be lower in Seattle than in Eastern Washington.

“That is no longer the case,” the new report says.

What? How can that be, when AAA’s daily price survey on Thursday indicated that Spokanites were forking over an average of $2.93 a gallon for regular, while West Siders were topping off their tanks at $2.80? And what about last summer, when the disparity grew so bad in Spokane that Sen. Maria Cantwell called for – and got – a federal investigation?

Market fluctuations, the new state report suggests. For years now, Spokane gas prices have been averaging 5 cents to 10 cents below Seattle’s. And while last summer’s Spokane prices peaked at more than 18 cents a gallon above Seattle’s, the report notes, “By January 2007, the Spokane prices were nearly 30 cents below those in Seattle.”

Even a month ago, gas in Spokane remained a relative bargain, 4 cents cheaper than Seattle, 8 cents cheaper than Yakima and nearly 12 cents cheaper than Bellingham. (Coeur d’Alene’s cheaper yet: an average of 11 cents cheaper than Spokane on Thursday.)

McKenna’s office commissioned the report primarily to figure out why gas prices were surging. Although prices have cooled off since spring, the initial research doesn’t reveal any big surprises:

“Oil prices: Much of the cost is closely tied to the price of crude oil, which now accounts for about half the cost of a gallon of gas.

Refinery costs: Refineries are charging dramatically more than in the past: 413 percent more from December 2003 to May 2007. The companies that run them say this is due to higher power costs, tougher environmental regulations, expensive equipment and chemical costs. (A second phase of the state’s research will examine this issue more closely.)

Taxes: At 54 cents a gallon, Washington has the highest combined state and federal fuel tax in America. The good news: Even so, gas here is only 16th highest among the 50 states. And Washington, unlike most states, manages to pay for its road costs almost entirely with the gas tax.

The next phase of the investigation will explore variations in wholesale gas prices from different sources, transportation costs, competition among retailers, and diesel costs, among other things. It’s expected to take six months.