The two major issues in Illinois’ energy use in 2007 are gasoline prices and the cost of electricity.

Gasoline

Price

Though there have been increases in gas prices in the state over the past decades, gas prices today are at about the same level as in 1980. These prices reflect many factors – the major factor (64%) is the cost of crude oil. The price of crude oil has risen due to political instability in the key oil-producing regions and the increased demand for oil in developing nations such as India and China. Additionally, oil supplies are shifting from “light” to “heavy” crudes, which require more processing and yield less gasoline overall. Formulation requirement by agencies such as the EPA have fragmented costs in the U.S., straining refinery capacities and increasing prices in places like the Chicago area and the Illinois suburbs of St. Louis, where gasoline must be more refined to reduce emissions in the summer months.

Refinery Capacity and Gasoline Prices

Increasing refinery capacity in the U.S. would be a key way to reduce prices, but no new refineries have been built since 1976. Refinery expansion continues to be a controversial issue all over the U.S. Some industry observers believe that improving technology or operating procedures alone cannot meet increasing demand for gasoline. Illinois is fortunate in this regard; it has 5.2% of the national capacity and 4 of the 50 largest refineries in the United States. Nevertheless, Illinois’ refineries’ capacity has decreased since the 1980s, from 1,024,300 to 903,600 barrels per calendar day. Illinois has excellent pipeline connections to crude oil; this suggests that Illinois’ major barrier to producing gasoline in the state is refinery capacity.

Taxes and Gasoline Prices

Taxes constitute about 14% of the price of gasoline nationally. Illinois taxes are generally well above the national average, and in places like Chicago this can amount to up to 12.75 cents in taxes per gallon. The difference in Illinois is due to the difference in sales taxes and the underground fuel storage tank fund tax; these taxes are generally regressive and increased transportation costs for trucks means increased prices for the products they transport.

Electricity

Illinois is a major electricity producer relative to surrounding states, though it relies heavily on coal-powered electric plants. This coal-heavy electricity production means that EPA and other regulations on greenhouse gas emissions will drive electricity prices up in Illinois. Still, Illinois has a large reliance on nuclear power as well, which means that it will have an overall energy price advantage relative to neighboring states, which are even more reliant on coal-fired power plants than Illinois.