February 2019

The Economic Contribution of Washington
State’s Petroleum Refining Industry in 2017
ACKNOWLEDGEMENTS
Washington Research Council has produced this report with funding from the
Western States Petroleum Association. Washington state's economy is simulated
using the Washington Research Council-Regional Economic Models, Inc. (WRCREMI) model, based on a detailed survey of the five oil refiners operating in Washington. The results of this analysis are the sole responsibility of the Washington Research Council, a nonprofit organization committed to objective analysis of economic and public policy issues in Washington state.

1. Report Overview
This report quantifies the impact of
Washington's five major petroleum
refiners on the state’s economy in
2017.
In 2017, the refiners directly provided
2,171 full-time jobs, paying an annual average wage of $129,132. In addition, the refiners employed, at high
wages, 2,658 contract workers on an
average day, doing maintenance,
capital repair and capital replacement. The refiners indirectly created
additional Washington state jobs in
industries from which they purchased goods and services, including
transportation, construction, utilities
and business services. Spending of
the income earned in these direct
and indirect jobs created even more
jobs.
The sum of all these effects was
25,366 jobs and $1.90 billion in personal income for Washington state in
2017. State and local governments
received $231.6 million in taxes directly from the refiners and $74.4

million from the follow-on activities
of other taxpayers.
Also, industries that distributed refined petroleum products, paid $503
million in wages to 16,078 workers in
2017. Excise taxes collected by the
state from these industries totaled
$97.3 million in 2017.
Because of Washington's unique tax
structure, a Washington refinery’s
state and local tax burden in 2017
was almost three times higher than
the state and local tax burden of a
comparable refinery located in California.
The report updates the economic
impact analyses of petroleum refining previously prepared by the
Washington Research Council (WRC
2004, 2006, 2009, 2010, 2012, 2014
and 2016), drawing upon a survey of
Washington refiners conducted by
the Council in 2018 (Appendix A)
and the WRC-REMI model of the
Washington state economy
(Appendix C).

 Table 2: Summary of Multipliers and Economic Impacts

Refining
Jobs

2,171

Multiplier

Indirect and Induced
Economic Effect

Major Petroleum Refiners
Total Economic Impact

11.68

23,171 jobs

25,366 jobs

$873,000

$1,491,770,000 personal income

$1,896,528,000 personal income

$41,600

$60,856,000 sales and use taxes

$63,656,000 sales and use taxes

$29,300

$13,575,000 B&O taxes

$101,075,000 B&O taxes

Source: 2018 Refiner Survey, DOR, WRC-REMI Model

2. Summary of Findings
Washington's five refineries provide
3.3 percent of the United States' refining capacity. In 2017 they processed 607,600 barrels of crude oil
and other feedstocks per day. Gasoline, diesel oil, and jet fuel are the
largest finished product categories,
representing 45.8 percent, 17.5 percent, and 13.5 percent, respectively,
of total production, with gasoline
production averaging 280,000 barrels
per day.
According to the refiners survey, the
five major refineries employed 2,171
workers in 2017, paying them an average annual wage of $129,132—
more than twice the Washington
state average.
As indicated in Table 2, these jobs
have a total employment multiplier
of 11.68, meaning that each direct
refining job generates an additional
10.68 jobs in the state, for a total
employment impact of 25,366 jobs
resulting from the five refineries.
Petroleum refining’s extraordinarily
high capital intensity, high wages,
extensive use of highly paid contract
labor and high taxes are the major
reasons for its high jobs multiplier.
The WRC-REMI model, which is used
here to determine the economic im-

February 2019

pact of the industry, calculates that
each petroleum job adds $873,000
to state personal income. Thus, the
2,171 refinery jobs ultimately contribute a total of $1.90 billion to state
personal income.
The industry is highly taxed and regulated, producing a bounty of tax
and fee revenues for state and local
government.

Refiners paid $231.6 million in state
and local taxes in 2017. This total
included $87.5 million in business
and occupation (B&O) tax, $101.2
million in hazardous substance tax,
$24.8 million in property tax and $2.8
million in sales and use taxes (Table
7.2 on page 11).
In addition, the refiners paid $16.6
million in regulatory fees in 2017
(Table 7.3 on page 11).

Including the indirect and induced
effects, the refining industry generated $63.7 million in sales and use and
$101.1 million in B&O taxes (Table 2).
Calculations of state and local taxes
paid by hypothetical 160,000 barrelsper-day refineries located in Washington and California indicate that
the tax burden on refineries in Washington was nearly triple that in California in 2017 (Table 8 on page 12).

Page 2

 Table 3: Washington Refineries

Firm

Year
Constructed

Location

Major Products

Capacity
(barrels/day)

BP Cherry Point
(formerly ARCO)

1971

Whatcom County,
northwest of
Ferndale

Gasoline, diesel oil, jet
fuel, calcinated coke

236,000

Phillips 66 Ferndale
(formerly
ConocoPhillips Tosco,
BP Oil and Mobil Oil)

Mid-1950s by
General
Petroleum
(subsidiary of
Socony-Mobil)

Whatcom County,
west of Ferndale

Gasoline, diesel oil, jet
fuel, liquid petroleum,
residual fuel oil

110,500

1957

Skagit County, five
miles east of
Anacortes

Gasoline, diesel oil, jet
fuel, propane, coke,
sulfur

149,000

1955

Skagit County, on
March Point

Gasoline, diesel oil,
turbine & jet fuel,
liquid petroleum gas,
residual fuel oil

125,000

1957

Pierce County,
Tacoma Tideflats

Gasoline, diesel oil, jet
fuel, marine fuel, gas
oils, emulsified & road
asphalt

42,000

Shell Oil (formerly
Equilon Enterprises
and Texaco)

Marathon Petroleum
(formerly, Andeavor,
Tesoro and Shell Oil)

U.S. Oil

Finally, refiners contribute generously to the communities in which they
are located. The five refiners and
their employees contributed $2.1
million to various community causes
in 2017. The firms themselves contributed about three-quarters of this,
with the balance provided by firmsponsored employee giving
(Appendix A, Table A.11).
3. Refining in Washington State

Building and development of the
industry. The oil refining industry in
Washington state began in the mid1950s with construction of refineries
by Shell in Anacortes (Skagit County)
and Mobil west of Ferndale on the
Strait of Georgia (Whatcom County).
February 2019

Following closely in 1957, Texaco
built in Anacortes, and U.S. Oil constructed its refinery on the Tacoma
Tideflats. In the early 1970s, in anticipation of the crude oil that would
begin flowing from Alaska's North
Slope, Atlantic Richfield (Arco) built
its refinery at Cherry Point. Now
owned by BP, this plant remains one
of the nation's newest refineries.
Ownership of all these facilities has
been fluid over the years: In January
2019, Par Pacific Holdings acquired
U.S. Oil and Refining Company. Today Washington's refining activity is
concentrated at the four major
plants in Whatcom and Skagit counties and the U.S. Oil plant in Tacoma.
(See Table 3.)

Page 3

 Federal restrictions. Oil companies
invest tremendous sums in their facilities in order to maintain their assets, to increase refining capacities,
and to remain viable in a highly competitive global industry. In the 1970s,
Washington's older oil refineries embarked on major plant modifications
in anticipation of the Alaskan crude.
Plans for new port facilities on Puget
Sound to receive supersized tankers
and new pipelines to carry Alaskan
oil on to the Midwest were debated.
But in 1977, before these plans could
be finalized, the Marine Mammal
Protection Act came up for reauthorization in Congress. Washington's
then-senior senator, Warren Magnuson, preempted these plans by
attaching an amendment to the
reauthorization bill prohibiting construction of new ports east of Port
Angeles.

Geographic isolation. This decision
sealed Washington's isolation from
the rest of the country's petroleum
supplies by preempting pipeline construction to the upper Midwest that
would have provided the Northwest
with easier access to Eastern and
Midwestern distribution systems.
Today, Washington's five refineries
make up 3.3 percent of the nation's
total refining capacity (EIA 2018a).
With this state accounting for about
2.1 percent of national petroleum
consumption, in-state refineries produce quantities more than sufficient
for Washington's needs (EIA 2018b).
In 2017, 54 percent of Washington
production went to in-state customers, 38 percent was exported to other
states, and 8 percent was exported
to other countries.

Dependence on in-state refining.
Other areas of the country—the Midwest and the East—are connected to
February 2019

a larger distribution system that allows their short-term petroleum supply disruptions to be accommodated
more easily than those in the West,
which are not connected to the Gulf
Coast and Midwest pipeline systems.
West Coast consumers are supplied
primarily from refineries in California
and Washington.
Geographically, the three most important sources of crude oil for
Washington refineries are Alaska's
North Slope, the Canadian province
of Alberta and the Bakken oil field of
North Dakota.
Nationally, plant obsolescence and
federal and state regulations requiring cleaner products and production
processes have resulted in a reduction in the number of operable U.S.
petroleum refineries from 301 in
1982 to 135 at the beginning of
2018. Those refineries that remain,
however, are more efficient, with 4
percent more refining capacity available today than in 1982.
Over the decade prior to the 2001–
03 recession, the increased demands
of a growing population and economy and an increasing array of
“boutique” fuels required by federal
and state regulations strained capacities, with price effects felt throughout the country. The 2001–03 recession provided a respite, but capacity
constraints returned at mid-decade
as the economy recovered. The situation was exacerbated by hurricane
damage to refineries along the Gulf
Coast. During 2008–09, high crude
oil prices followed by financial crisis
induced demand reductions severely
squeezed refinery margins. During
2010–2012, margins for North American refineries rebounded as increased crude oil production in the
U.S. lowered refinery costs, while
Page 4

 global product prices remained high.
Subsequently, the profitability of
North American refineries trended
lower as global refining profits converged (EIA 2014, 2016c). During
summer 2018, output of U.S. refineries exceeded 18 million barrels per
day for the first time, although capacity utilization remained below the
peak set in 1998 (EIA 2018c).
The constrained supply-demand relationship combines with the West
Coast's isolation to produce an economy in Washington that is unusually
dependent on its in-state refining
capacity. It is this industry and its relationship with the larger Washington state economy that are described
in the sections that follow.
4. Industry Impact Analysis
To quantify the impact of Washington state's refineries on its economy,
we use the WRC-REMI model to simulate a permanent increase in refinery employment of roughly 8 percent
and measure the resulting changes
in total state employment, personal
income, and gross product. Dividing
these resulting changes by the
change in refinery employment gives
“multipliers” that are then applied to
the industry's total employment to
calculate total economic impact. For
example, in 2017 the five refineries
had 2,171 employees. With a multiplier of 11.48 the total impact of the
refineries was 25,366 jobs. Similarly,
the refinery activities resulted in
$1,280,000 of state personal income
for every direct job, or a total
statewide $2.78 billion in personal
income.
The economic impacts of petroleum
refining in Washington, however, are
broader than those of most other

February 2019

sectors of the economy. If petroleum
prices go up, the effects are felt in
the price of food and other essential
consumer goods, the costs of commuting, and the cost of moving
goods to market for businesses
throughout the economy. And, unlike products from other sectors, alternative petroleum supplies or substitute products are not readily available in the case of an emergency. In
order to fully appreciate the economic value of the petroleum refining industry in Washington, the dire
economic consequences possible in
a catastrophic scenario must be
acknowledged. Foreign product
would have to be imported, increased dock and terminal capability
would be required, product prices
would increase in response to diminished supply availability and stability,
and these increases would be felt
throughout the economy.
In the sections that follow, Washington's petroleum refining industry is
described under equilibrium conditions by summarizing consumption
(Section 5), production (Section 6),
and the direct purchases of the five
major industry refiners (Section 7).
Based on these data, the WRC-REMI
model calculates the effect of the
five refineries on jobs, income, retail
sales and use, and B&O taxes
statewide (Section 9).
Section 8 presents a comparison of
taxes paid by hypothetical 160,000
barrels-per-day refineries located in
Washington and California.
Finally, in Section 10 we provide employment, wage, and tax contribution information on the portions of
the transportation, wholesaling, and
retailing sectors that operate downstream of the refining process. These

Page 5

 petroleum-related activities combine
to assure that petroleum products
get to their markets in Washington
state and beyond. Although they
would exist regardless of the presence of in-state refining, their inclusion here helps to give a complete
picture of the petroleum industry in
Washington state.

Figure 5.1: Washington State Petroleum Product Consumption
(millions of barrels)
All Petroleum Products
Motor Gasoline

154.7

151.8
137.2

135.6

105.4

67.0

63.8

63.1

5. Petroleum Product
Consumption in Washington

53.5
42.7

1980

1990

Source: EIA

2000

2010

2016

Figure 5.2: Washington Petroleum Consumption Trends
$3,400

27

$3,200

26
Real State GDP Per Barrel (Left Axis)

$3,000

25
Barrels Per Capita (Right Axis)

$2,800

24

$2,600

23

$2,400

22

$2,200

21

$2,000

20

$1,800

19

$1,600
1997

18
1999

2001

2003

2005

2007

2009

2011

2013

2015

Source: EIA

Figure 5.3: 2016 Consumption By Sector

Commercial
2.6%
Electric Power
0.02%
Transportation
81.2%

Industrial
14.5%

Residential
1.6%

Source: EIA

February 2019

Detail does not sum to 100% due to rounding

Washington households and businesses consumed a bit less than 155
million barrels of finished petroleum
products in 2016, up 47 percent from
1980, according to the Energy Information Administration (EIA). (See
Figure 5.1.) Washington’s 2016 consumption was 2.1 percent of the U.S.
total and about 15 percent of EIA's
western Petroleum Administration
for Defense (PAD) District V, which
encompasses Washington, Oregon,
California, Nevada, Alaska, and Hawaii. PAD District V represented 14
percent of total U.S. consumption in
2016 (EIA 2018b).
Petroleum product consumption in
Washington increased by only 4 percent from 1997 to 2016. Over the
period the state’s population grew
by 29 percent and the output of the
state economy (as measured by real
gross state product) grew by 69 percent. As a result, per-capita consumption declined by 19 percent,
while gross state product per barrel
of petroleum increased by 62 percent. Residual fuel accounted for 52
percent of the gain from 2014 to
2016, while jet fuel accounted for 19
percent. (See Figure 5.2.)
The several broad classes of customers who purchase petroleum products help to explain the state's consumption patterns. Demand for pePage 6

 Figure 5.4: 2016 Consumption By Product (Volume in Barrels)

Other
10.1%

Residual
Fuel Oil
11.6%

Asphalt & Road
Oil
1.2%

Distillate Fuel Oil
17.5%

Motor Gasoline
43.3%

Jet Fuel
13.5%

Hydrocarbon
Gas Liquids
2.8%

troleum products from industrial and
residential customers decreased over
the 19-year period by 19 percent
and 40 percent, respectively. Transportation and commercial customer
demand increased by 10 percent and
122 percent (EIA 2016b).
As shown in Figure 5.3 on page 6,
commercial customers accounted for
less than 3 percent of Washington’s
total petroleum product consumption; transportation and industrial
customers together accounted for
more than 85 percent.
By far, motor gasoline was the largest category of product consumed,
at 43.3 percent of the total. (See Figure 5.4.)

Source: EIA

6. Refinery Production in
Washington
The data that follow in Sections 6, 7,
and 8, unless otherwise indicated,
are the aggregated results of our
survey of Washington's five major
refiners (Appendix A).

Finished products. Washington's
Figure 6.1: 2017 Washington Production By Product (Volume in Barrels)

Coke 0.8%
Propane 1.5%

Diesel Oil
22.9%

Residual F.O.
5.8%
LPG 1.3%
Calcined Coke
1.0%
Gasoline
45.8%

Source: 2018 Refiners Survey

Jet & Turbine
Fuel
15.2%

Sulfur 0.4%
Marine F. 0.7%
Gas Oils 2.0%
Asphalt 1.1%
Other 1.7%

refineries produced 611,900 barrels
per day and more than a dozen different products in 2017. Gasoline,
280,000 barrels per day in 2017, is by
far the largest product category, accounting for 45.8 percent of the total. Diesel oil and jet fuel are the next
largest at 22.9 percent and 15.2 percent, respectively. (See Figure 6.1.)
Gasoline accounted for 49.4 percent
of the refineries’ total $15.3 billion in
output value in 2017. Again, diesel
oil and jet fuel are next, accounting
for 24.3 percent and 13.1 percent,
respectively.

Markets. In 2017, 54.6 percent of
Washington refined product was
sold within the state; 37.8 percent of
total product was sold domestically
February 2019

Page 7

 Figure 6.2: 2016 Washington Production By Destination (Volume in Barrels)

Foreign
7.7%

Domestic Out-ofState
37.8%

Source: 2018 Refiners Survey

In-State
54.4%

Detail does not sum to 100% due to rounding

Figure 6.3: Top Export Markets in 2017

The World Institute for Strategic Economic Research (WISER) provides
data on the destination of foreign
exports of petroleum products from
Washington. In 2017, the $1.24 billion of petroleum products exported
from the state amounted to 2.4 percent of Washington’s foreign exports. More than half of the dollar
value of petroleum product exports
went to Canada. Mexico was the second most important export market,
followed by Chile, Australia, New
Zealand, Brazil and Saudi Arabia.
(See Figure 6.3; Appendix B provides
more complete listings of export
destinations for 2016 and 2017.)

Product transport. Finally, 47.3 per-

Saudi Arabia 1.5%
Brazil 1.6%
New Zealand 1.7%
Australia 3.2%
Chile 3.4%
Canada
52.5%
All Other 11.0%

Mexico
25.2%

Source: WISER

outside Washington; and the remaining 7.7 percent was delivered to
foreign buyers. (See Figure 6.2.)

cent of all products refined in Washington was shipped by pipeline in
2017, primarily to Seattle and Tacoma markets and on to Portland. Of
the remaining product, 36.4 percent
was shipped by water, to Portland
and other destinations along the Columbia River as well as to foreign
customers; 13.4 percent went by
truck; and 3.0 percent went by rail.

Detail does not sum to 100% due to rounding

Table 7.1: Quantity and Value of Feedstock Inputs

Total Feedstock Inputs (thousands of barrels/day)
Crude Oil
Other
Total Value of Feedstock Inputs (millions of dollars)
Crude Oil
Other

February 2019

2016
635.0
609.9
25.1
9,920.2
9,530.1
390.1

2017
607.6
572.3
35.4
11,671.0
11,194.2
476.8

Page 8

 7. Washington Refiners: Inputs

Figure 7.1: Crude Oil Production, Alaska and North Dakota (1,000 BBL/D)
4,000
Texas

Feedstock. Washington's petroleum

3,500

refineries received 607,600 barrels
per day of crude oil and other feedstock inputs (e.g., butane, isobutene,
and cat feed) in 2017. The total volume of feedstock in 2017 was 4.3
percent lower than 2016. The value
of 2017 feedstocks was $11.7 billion,
up 17.6 percent from 2014. (See Table 7.1 on page 8.)

Alaska
3,000
North Dakota
2,500
2,000
1,500
1,000
500
0
'60

'64

'68

'72

'76

'80

'84

'88

'92

'96

'00

'04

'08

'12

'16

Source: EIA

Figure 7.2: 2017 Average Annual wages
$129,132

$62,073

State
(BLS)

$49,555

$47,035

$45,491

Pierce
(BLS)

Skagit
(BLS)

Whatcom
(BLS)

Source: ESD and 2018 Refiners Survey

February 2019

Washington refiners spent $13.1 billion on feedstocks and other inputs
in 2017. This section describes their
main areas of expenditure.

Refineries
(Survey)

In 2017, 44.8 percent of crude oil
came into the refineries by water,
29.0 percent came by pipeline; and
26.2 percent came by rail. Of the
crude oil, 34.6 percent was Alaskan,
23.8 percent was Canadian from
conventional sources, 10.4 percent
was Canadian from oil sands and
23.3 percent was from North Dakota.
The remaining 7.9 percent came
from a number of other places.
This represents a noteworthy change
from 2003 when 90.4 percent of
crude came by water from Alaska
and no crude came to Washington
by rail from North Dakota. Driving
this change was the precipitous decline of crude oil production in Alaska and growth of production in
North Dakota, as shown in Figure
7.1. The advances in drilling technology that triggered the North Dakota
oil boom also enabled the resurgence of production in Texas.

Labor. Washington's five oil refiners
employed 2,171 workers in 2017 and
paid them extraordinarily well. The
refiner survey puts the 2017 average
annual refinery wage at $129,132.
According to the state Employment
Page 9

 Security Department (ESD), the overall statewide average wage was
$62,073 in 2017, less than half of the
refinery average wage. (See Figure
7.2 on page 9.)
This contrast is even more pronounced when comparing refining
wages with average annual wages in
Whatcom and Skagit counties where
the four largest refineries are located.
The average annual wage in Whatcom County in 2017 was $45,491
while in Skagit County it was $47,035
(ESD 2018).
Refinery payrolls exceeded $280 million in 2017. Worker benefits exceeded $122 million, and average total
compensation per employee was
$185,519.

Contract labor. Washington's petroleum refiners regularly rely on contract workers to clean and service
various parts of their plant facilities
and equipment, as well as to conduct
scheduled major repairs and upgrades. The number of workers varies from year to year—1,745 in 2016
and 2,658 in 2017—and represents a
significant part of the employment
base, especially in Whatcom and
Skagit counties.
Figure 7.3: 2017 Non-Labor Operating Expenses

Transport. 2.9%
Feedstocks
93.5%

N.D. Mfg. 2.2%
Util. & Com. 1.3%
Other 0.1%

In 2017 refiners paid $289.5 million
for contract workers, an average of
$108,900 per worker.
Thirty-three percent of contract
workers in 2017 (869 workers) were
engaged in capital repair and replacement, at a cost of $95.6 million.
In addition to this contract labor, the
refiners made $215.0 million in construction and other capital expenditures. Purposes included safety and
environmental compliance, efficiency
improvements and clean fuels.

Non-labor operating expenditures. Non-labor operating expenditures are mostly for feedstocks—
crude oil—and intermediate processed crude (which will be refined
further into higher grade products)
and chemicals and catalysts to be
applied to the crude to produce various final products. These purchases
show up in two categories: feedstocks and nondurable manufactured goods (primarily intermediate
petroleum products and chemicals).
Combined, these two categories account for more than 93 percent of all
non-labor operating expenditures.
Significant amounts are also spent
on utilities and transportation, which
together accounted for $526.8 million in 2017. Utilities expenditures,
including electricity, gas and communications, totaled $167.46 million
in 2017, and transportation totaled
$359.48 million. Transportation expenditures were primarily for waterborne transport of inbound and outbound product (Appendix A, Table A.7).

Taxes. Refiners paid $231.6 million
in state and local taxes in 2017 (See
Table 7.2 on page 11.). The amount
paid in 2016 was lower, $197.0 million.

Source: 2018 Refiners Survey

February 2019

Detail does not sum to 100% due to rounding

Page 10

 Table 7.2: Taxes Paid by Refiners in 2017

Retail sales and use tax
Business and occupation tax
Property tax
Unemployment compensation tax (state only)
Hazardous substance tax
Oil spill tax
Petroleum Products Tax
Motor vehicle fuel tax
Other
Total

(Millions)
$2.8
$87.5
$24.8
$1.7
$102.2
$12.1
$0.4
$0.1
$0.1
$231.6

% of Total
1.2%
37.8%
10.7%
0.7%
44.1%
5.2%
0.2%
0.1%
0.0%

Source: DOR, 2018 Refiners Survey

The state hazardous substance tax—
$102.2 million—contributed the largest share of total taxes paid in 2017,
44.1 percent of the total. The rate on
this tax is 0.7 percent of wholesale
value. Petroleum products constitute
a large portion of the products subject to the tax.
Ranking a close second was the business and occupation tax, $87.5 million, 37.8 percent of the total. Refineries are subject to this tax under
either the manufacturing or wholesaling categories, at the rate of 0.484
percent.
Next in line was the property tax,
$24.8 million and 10.7 percent of the
total tax bill.
The fourth most costly tax in 2017
was the oil spill tax, $12.1 million. It
is a tax of 5 cents per barrel on crude
oil or petroleum products that are

transported by ship, barge, railroad
or (beginning April 1, 2018) pipeline
in Washington and delivered to an in
-state terminal. Of the proceeds, 4
cents are paid into the oil spill administration account and 1 cent into
the oil spill response account. When
the oil spill response account is fully
funded, the 1 cent tax is suspended;
when the account is short of funds,
the tax is resumed. The 1 cent response tax was last suspended from
April 1, 2013 to Dec. 31, 2015.
Through a credit, the tax is effectively eliminated for crude oil or petroleum products exported from the
state.
The petroleum products tax is another tax unique to the petroleum industry. The current rate on this tax is
0.3 percent of product value. Revenues from this tax are dedicated to
the pollution liability insurance pro-

Table 7.3: Regulatory Fees Paid by Refiners in 2017 (Dollars)

Amount
Air operating registration and permit fees
Waste disposal fees
Wastewater discharge fees
Building Inspection Fees
Building permit fees
Other
Total

$2,477,552
$2,489,145
$916,568
$18,000
$5,139,000
$5,590,382
$16,630,647

% of Total
14.9%
15.0%
5.5%
0.1%
30.9%
33.6%

Source: 2018 Refiners Survey

February 2019

Page 11

 gram, which assists owners of underground storage tanks in obtaining
insurance for upgrading and replacing tanks and preventing leaks. This
tax is suspended when the pollution
liability insurance program account
balance exceeds a trigger value. The
tax was most recently suspended
from July 1, 2017 through March 31,
2018. Refiners paid $0.4 million in
2017.

tax—is levied in California but not in
Washington. Two of these taxes—the
business and occupation tax and the
hazardous substance tax—are levied
in Washington but not in California.
The remaining three taxes—the sales
and use tax, the property tax and the
oil spill tax—are levied in both states.

The refineries reported paying $2.8
million in sales and use taxes in 2017.
Currently the sales and use tax rate
paid by four of the refineries is 8.5
percent, while the rate paid by the
other refinery is 9.5 percent.

The overall 2017 tax burden in
Washington, $48.8 million, was nearly three times the burden in California, $16.9 million. This is largely due
to the fact that the Washington refinery pays more in B&O and hazardous substance taxes than the California refinery pays in corporate income
tax.

Fees. In addition, the refiners paid

Corporate income tax. California’s

$16.6 million in regulatory fees in
2017. These included building permit
fees ($5.1 million), air operating registration and permit fees ($2.5 million), and waste disposal fees ($2.5
million). (See Table 7.3 on page 11.)

primary business tax is a corporate
income tax. To avoid the complications inherent in state-level income
taxation of multi-state businesses,
we assume that the corporation
owning the refinery does business
only in California. California’s corporate income tax rate is 8.84 percent.
Based on financial information filed
with the U.S. Securities and Exchange
Commission, we estimate the taxable
income for a 160,000 barrels-per-day
refinery to be $82.6 million and the
corporate income tax due to be $7.3
million.

8. Comparison with Taxation of a
California Refinery
Table 8 compares the taxation of hypothetical refineries that processed
160,000 barrels of crude oil per-day
in Washington and California in
2017.
We focus on six major taxes. One of
these taxes—the corporate income
Table 8: Taxes on a 160,000 Barrels per Day Refinery, 2017 (Millions of Dollars)

Washington
Corporate Profits Tax

Source: WRC calculations

February 2019

Business & Occupation Tax

$ 19.0

Hazardous Substance Tax

$ 21.5

California
$

7.3

Property Tax

$ 4.2

$

5.0

Sales & Use Tax

$ 0.8

$

0.8

Oil Spill Tax

$ 3.3

$

3.8

$ 48.8

$

16.9
Detail does not sum to total due to rounding

Page 12

 B&O tax. The B&O tax is Washington’s primary business tax. It is a tax
on a business’s gross receipts. Our
160,000 barrel per day refinery has
refined product sales of $3.93 billion.
This results in a B&O tax obligation
of $19.0 million at the manufacturing/wholesaling rate of 0.484 percent.
The B&O tax is a tax on gross income, without any deductions for
the costs of making the goods or
services sold, while the corporate
income tax is a tax on net income,
after deduction of these costs. The
B&O tax tends to be more burdensome than a corporate income tax
for low margin businesses such as
refining.
Refinery margins as a percentage of
revenue are particularly low when
crude oil prices are high. In the long
run, the prices refiners pay for crude
oil passes directly through to the
prices they receive for products, as
Figure 8 illustrates. On the figure we
have plotted the monthly average
U.S. Gulf Coast spot price of convenFigure 8: Monthly Average Spot Prices May 1987 – November 2018
Gulf Coast Conventional Regular Gasoline vs. Brent Crude Oil
2009 Dollars Per Gallon

Gulf Coast Conventional Regular Gasoline (Y)

$4

$3

tional regular gasoline against the
monthly average spot price of the
benchmark European Brent crude oil
(measured in dollars per gallon in
both cases) from May 1987 to November 2018. The slope of the regression line through the data points
is almost exactly equal to one.

Hazardous substance tax. Returning to the taxes listed in Table 8.1,
the hazardous substance tax is a second gross receipts tax levied by
Washington state. Applying an effective rate of 0.6 percent to gross receipts of $3.93 billion gives a $21.5
million hazardous substance tax obligation for the 160,000 barrel per day
Washington refinery. (Based on taxes
actually paid by refineries in 2017,
we use the 0.545 percent effective
rate rather than the statutory 0.7
percent rate to account for various
deductions and credits including the
credit for product shipped out-ofstate in vehicle fuel tanks.)

Property tax. We assume that the
Washington refinery is in Skagit
County and that the California refinery is in the city of Martinez. We estimate that the taxes that would be
paid by a 160,000 bbl/day refinery in
Anacortes to be $4.2 million. Based
on the difference in property tax
rates between Skagit Countyand
Martinez, we estimate that such a
refinery in Martinez would pay $5.0
million in property taxes.

Sales and use tax. In 2017, the com$2

$1
Equation of Regression Line:
Y = 0.201 + 0.998 × X
(0.013) (0.009)
R2 = 0.971

$0
$0
Source: EIA,
EIA BEA, WRC

February 2019

$1

$2
Brent Crude Oil (X)

$3

$4

bined state and local sales tax rate
was 8.5 percent in Skagit County and
8.75 percent in Martinez. Based on
the survey of Washington refineries,
we estimate transactions subject to
the sales and use tax to be $8.9 million and the amount paid to be 0.3
million.

Page 13

 Oil spill tax. Both states impose an
oil spill tax. The rate in Washington is
5 cents per barrel. As we noted above,
in Washington, 1 cent of the 5 cents is
sometimes suspended. The full 5 cents
was collected in 2017. Based on the
amounts paid by Washington refineries
in 2017, we estimate that the 160,00
barrel per day refinery would pay
$3.3 million in Washington. The oil
spill tax rate in California is 6.5 cents
per barrel, with no credit for exported product. The oil spill tax paid in
California is then $3.8 million.
9. Petroleum Refining Industry
Direct, Indirect and Induced
Economic Impacts
The economic impact of refineries on
the state's economy can be divided
into three primary categories: direct,
indirect, and induced effects:
• The direct effects are those in the
industry itself—the refinery jobs
and payroll, and the taxes paid by
the refiners.
• The indirect economic effects
include the jobs, wages, and taxes
of upstream suppliers of the
refineries—not only the suppliers
of crude oil, but also the
construction companies and
contract workers used for plant
maintenance and repair and the
office product and equipment
suppliers, for example. The indirect
economic effects also include the
jobs, wages, and taxes of the
supply chains of those suppliers.
• Finally, the induced effects are the
jobs, income, and taxes
contributed by firms in industries
that supply daily consumables and
services—e.g., food, dry cleaning,
banking—to workers holding the
direct and indirect jobs.
February 2019

The relationship between the direct
jobs, income, and tax effects in an
industry and their indirect and induced effects are captured by multipliers, which are calculated using the
WRC-REMI model of the Washington
state economy.
The employment multiplier for the
petroleum refining industry is 11.68.
Applying this multiplier to the 2,171
direct refinery jobs in 2017 gives a
total state employment impact of
25,336 jobs.
This is large compared to employment multiplier typically seen in
studies that use input-output models. For example, the 2007 Washington state Input-Output Study (2014)
calculates that the employment multiplier for manufacturing/
construction overall is 2.65. For the
petroleum and coal products manufacturing sector (the “three-digit”
sub-sector of manufacturing that
contains the petroleum refining industry) the state study calculates an
employment multiplier of 6.80.
The WRC-REMI model finds larger
impacts because it is a more complete model of the state economy
than the state Input-Output model.
The REMI model incorporates many
significant behavioral responses to
changes in prices and costs that are
not picked up by a simple inputoutput model: The wage rate depends on the supply and demand for
labor. Migration and labor force participation rates respond to changes
in wage rates. Consumer purchases
of specific goods and services respond to changes in relative prices
and personal income. In addition,
producers adjust production methods in response to changes in relative costs, market shares respond to

Page 14

 changes in regional production costs,
and investment rises in response to
increases in output.
Two channels of impact captured by
the REMI model and absent from the
Input-Output model are particularly
important in explaining the high employment multiplier the WRC-REMI
model finds for petroleum refining:
government spending of the tax revenues paid by the refineries and investment spending by the refineries
and their suppliers. When these two
channels are turned off, the employment multiplier calculated for petroleum refining with the WRC-REMI
model is 4.51. Government spending
of the tax revenue generated by refining adds 2.29 to the multiplier,
while investment spending adds
4.88. Of this 4.88, 1.45 is due to investment by the refineries and 3.43 is
due to investments elsewhere in the
economy.
Several additional factors contribute
to the petroleum refining industry's
large multiplier. First, petroleum refiners pay high wages. Thus, the employment induced by refinery employee spending is relatively great.
Second, the petroleum industry ranks
high in the ratio of in-state supplied
intermediate inputs (including contract labor) to employee income. For
this reason, indirect employment is
relatively high. And some of these

indirect jobs (e.g. contract labor) pay
unusually high wages.
The WRC-REMI model calculates that
each refining job results in an additional $873,000 of state personal income. At 2017 employment levels,
the industry adds $1.895 billion to
state personal income.
In 2017 state and local sales and use
taxes averaged $0.0336 for each dollar of state personal income. With
the income multiplier of $873,000
each petroleum refining job results
in $29,300 in state and local sales
taxes or a total of $63.7 million.
The refiners directly paid $87.5 million in B&O taxes in 2017. In 2017
state B&O taxes averaged $0.0091
for each dollar of personal income.
Multiplying this rate into $1,429 million—the increase in state personal
income we ascribe to the 2,171 refinery jobs net of the wages and benefits of the refinery workers—gives
$13.6 million additional induced and
indirect B&O tax revenue, for a total
of $101.1 million, or $46,600 per direct job.
These impacts can be expressed in
terms of the hypothetical Washington refinery producing 160,000 barrels of product a day that was analyzed in Section 8. In 2017, this refinery would have provided 568 jobs,
and these workers would have re-

Table 9: Impact of a 160,000 Barrels Per Day Refinery

568 Direct Jobs
+6,069 Additional Jobs Elsewhere in the State Economy
$105.3 Million Direct Compensation
+$284.9 Million Additional Personal Income Elsewhere in the Economy
$49.3 Million Direct Taxes
+$20.2 Million Additional Sales, Use and B&O Taxes Elsewhere in the Economy
Source: WRC

February 2019

Page 15

 ceived $73.3 million in wages and
salaries and $32.0 million in benefits.
In addition to the direct jobs and income, the refinery would generate
6,069 jobs and $284.9 million in personal income elsewhere in the state’s
economy. The refinery itself would
pay $49.3 million in state and local
taxes. In addition to these direct taxes, the indirect and induced activities
generated by the refinery would provide $20.2 million in sales, use and
B&O tax revenue. (See Table 9 on
page 15.)
10. Washington Petroleum Industry: Downstream Activities
Washington's petroleum refiners rely
on a number of industries to distribute their product to consumers.
These include transportation
(pipelines, barges, trucks, and rail)
and transportation support facilities
(terminals, stockyards, and bulk stations), wholesalers, and retailers
(gasoline stations and fuel oil dealers).
These downstream industries exist
due to petroleum product consumption in our economy, not as a result
of petroleum refining. Presumably, if
the refineries were gone or if they
had never existed in Washington,
finished petroleum products would
be imported to terminal and stockyard facilities, transported to retail

destinations within the state, and
sold to consumers through systems
much like those that currently exist,
together with similar job, wage, and
tax effects. Even so, their direct economic contribution is substantial and
their role in the larger petroleum industry is crucial. This section describes the employment, wages, and
taxes associated with these industries.
Of the total finished products produced by Washington's refineries, 50
percent leaves through pipeline to
markets in Seattle and Tacoma and
beyond. Another 36 percent goes by
water to Seattle, Portland, or elsewhere with the remaining 14 percent
of product shipped by rail or truck.
About 50 percent of product is delivered to retailers for consumer sales
within the state of Washington
(Appendix A, Tables A.4 and A.5).

Jobs and wages. According to detailed data reported to the Bureau of
Labor Statistics (BLS) for 2017, the
most recent year for which such data
are available, there were about 1,600
employers in these downstream industries. Together, they paid $503
million in wages to 16,078 workers.
These are all workers covered by unemployment insurance in these industries, so the number includes
both full-time and part-time workers.
Table 10.1 shows these data for each

Table 10.1: Employment and Wages by Industry, 2017

Industry (NAICS Code)
Petroleum Bulk Stations and Terminals (424710)
Other Petroleum Merchant Wholesalers (424720)
Gasoline Stations With Convenience Store (447110)
Other Gasoline Stations (447190)
Fuel Dealers (45431)
Pipeline Transportation (486)

Firms
25
81
1,371
71
56
9

Total
Wages Paid
$52,764,882
$69,513,304
$258,561,320
$35,855,737
$54,870,574
$31,667,000

Average
Employment
791
991
11,827
1,180
1,021
268

Average
Annual Wage
$66,707
$70,145
$21,862
$30,386
$53,742
$118,197

Source: BLS

February 2019

Page 16

 Table 10.2: Taxable Income and Taxes Due by Industry, 2017 (Millions of Dollars)

Industry (NAICS Code)

Gross

Taxable

B&O
Tax

Other
Excise

Total

Petroleum Products Wholesaling (4247)

8,631.9

7,416.6

37.0

18.0

55.0

Gasoline Stations (447)

9,752.0

7,686.1

37.6

2.0

39.6

458.0

419.6

2.1

0.5

2.6

43.8

41.1

0.2

D

D

Fuel Dealers (45431)
Pipeline Transportation (486) 2016
Source: DOR

D: Value not disclosed by DOR

industrial classification with its corresponding North American Industrial
Classification System (NAICS) code.
Among the downstream industries
there are three broad tiers of employment and pay:
• Pipeline Transportation Companies
(crude oil, refined petroleum products and natural gas) employ a
small number of highly paid
workers—268 workers made
$118,197 (plus benefits) on
average in 2017.
• Bulk stations and terminals,
wholesalers, and fuel oil dealers
employed about 2,800 workers
who earned on average $63,200 in
2017.
• Gasoline stations generate a large
wage bill with a lot of lower-wage
and part-time jobs. In 2017, this

industry's 1,442 employers paid
total wages of $294.4 million to
13,007 workers.

Taxes. The state Department of Revenue (DOR) reports excise tax data
on petroleum products wholesaling,
gas stations and fuel dealers for
2017 (DOR 2018a, 2018b). Excise tax
data for 2017 is not disclosed for
pipelines.
As shown in Table 10.2, excise taxes
due from wholesaling, gas stations
and fuel dealers industries totaled
$97.3 million in 2017. Gasoline stations paid $39.6 million in excise taxes; wholesalers paid $55.0 million;
fuel dealers, $2.6 million.
In 2016 pipeline companies paid
$222,000 in B&O taxes. DOR has not
disclosed their taxes for 2017.

Washington Research Council
520 Pike Street, Suite 1212
Seattle, Washington 98101
206-467-7088
researchcouncil.org
February 2019

Page 17

 Appendix A

A.1: Quantity and Value of Feedstock Inputs
Feedstock Quantity (KBBLS/Day)
Crude Oil
Other
Total
Feedstock Value ($K)
Crude Oil
Other
Total
A.2: Quantity and Value of Output
Output Quantity (KBBLS/Day)
Gasoline
Diesel Oil
Jet and Turbine Fuel
Calcined Coke
LPG
Residual Fuel Oil
Propane
Coke
Sulfur
Marine Fuels
Gas Oils
Emulsified and Road Asphalt
Other
Total
Output Value ($K)
Gasoline
Diesel Oil
Jet and Turbine Fuel
Calcined Coke
LPG
Residual Fuel Oil
Propane
Coke
Sulfur
Marine Fuels
Gas Oils
Emulsified and Road Asphalt
Other
Total

February 2019

2016

2017

609.9
25.1
635.0

572.3
35.4
607.6

9,530,067
390,137
9,920,205

11,194,202
476,774
11,670,975

2016

2017

293.0
150.1
92.1
5.9
7.9
36.2
9.2
5.9
1.2
3.2
8.8
7.0
13.3
634.0

280.0
140.0
93.1
6.0
7.9
35.3
8.9
4.6
2.1
4.1
12.4
7.0
10.3
611.9

6,482,800
3,088,417
1,836,106
147,808
88,655
457,582
60,553
49,968
2,512
51,927
163,525
110,124
175,625
12,715,602

7,570,294
3,724,487
2,315,285
167,653
86,976
624,229
109,159
47,448
1,086
100,957
251,986
133,883
182,077
15,315,519

Page 18

 A.3: Origin of Inputs 2017
(KBBLS/Day)
Alaska
Canada (Conventional)
Canada (Oil Sands)
Bakken
All Other Origins

A.4: Destination of Output 2017
(KBBLS/Day)
Gasoline
Diesel Oil
Jet and Turbine Fuel
Calcined Coke
LPG
Residual Fuel Oil
Propane
Coke
Sulfur
Marine Fuels
Gas Oils
Emulsified and Road Asphalt
Other

A.5: Mode of Transport 2017
Feedstocks (KBBLS/Day)
Crude Oil
Other
Outputs (KBBLS/Day)
Gasoline
Diesel Oil
Jet and Turbine Fuel
Calcined Coke
LPG
Residual Fuel Oil
Propane
Coke
Sulfur
Marine Fuels
Gas Oils
Emulsified and Road Asphalt
Other

February 2019

Crude Oil

Other

197.8
135.9
59.5
133.3
45.1

6.0
2.0
27.6

Washington

Other U.S.

Foreign

118.9
85.1
72.5
6.0
7.8
17.6
9.1
0.0
0.8
3.8
4.0
3.0
3.3

116.4
74.4
12.4
12.2
5.9
4.0
5.5

19.9
4.9
7.8
5.1
4.6
1.3
2.5
0.9

Pipeline

Water

Truck

166.0
1.6

256.4
21.2

-

158.8
70.5
48.8
5.8
0.8
1.2
3.3

91.9
45.1
30.9
34.9
2.9
12.4
4.5

28.0
24.1
13.6
0.0
7.0
4.6
1.7
2.0
-

Total
255.2
164.3
92.8
6.0
7.8
34.9
9.1
4.6
2.1
3.8
12.4
7.0
9.7

Rail
149.7
12.3

1.0
0.1
6.0
2.0
1.4
0.0
0.5
5.0
2.5

Page 19

 A.6: Employment and Contract Labor
On-Site Employment
Number of FTE Employees
Total Payroll ($K)
Total Employee Benefits ($K)
Contract Labor
Expenditure ($K)
Service and Maintenance
Capital Repair and Replacement
Total
Number of Contract Workers (FTE)
Service and Maintenance
Capital Repair and Replacement
Total

A.7: Operating Expenditures Other than Labor or Feedstock ($K)
Non-Durable Manufactured Goods
Petroleum Products
Other Non-Durable Goods
Total
Durable Manufacturing
Construction
Transportation
Rail
Trucking
Automobiles
Waterborne
Air
Other
Total Transportation
Utilities and Communications
Electricity
Gas
Other
Total U&C
Finance, Insurance and Real Estate
Business Services
Other Services

February 2019

2016

2017

2,142
279,358
111,551

2,171
280,346
122,416

110,805
83,556
194,361

193,868
95,629
289,497

1,001
743
1,745

1,789
869
2,658

2016

2017

172,446
33,185
205,631
13,713
3,030

237,140
40,220
277,360
24,258
3,177

132,011
3,334
2,700
197,138
14,194
349,377

129,155
3,665
3,275
209,131
14,161
359,386

53,687
93,606
11,580
158,873
7,760
4,788
1,800

50,547
102,979
13,892
167,417
7,574
3,801
1,473

Page 20

 A.8: Non-Labor Capital Expenditures
Equipment ($K)
Materials and Supplies ($K)
Construction ($K)
Other ($K)
Total
A.9: Taxes and Fees (State and Local)
Taxes ($K)
Retail Sales and Use tax
Business and Occupation Tax
Property Tax
Unemployment Insurance Tax
Industrial Insurance Premium
Hazardous Substance Tax
Oil Spill Tax
Petroleum Products Tax
Motor Vehicle Fuel Tax
Special Fuel Tax
Other
Regulatory Fees ($K)
Air Operating Registration and Permit Fees
Waste Disposal Fees
Wastewater Discharge Fees
Building Inspection Fees
Building Permit Fees
Other
A.10: Estimated Services and Retail Trade
Food Services ($K)
Associated with Contract Labor
Associated with Business Visitors
Total
Hotel and Motels ($K)
Associated with Contract Labor
Associated with Business Visitors
Total
Other Trade and Services ($K)
Associated with Contract Labor
Associated with Business Visitors
Total
A.11: Contributions
Corporate
Firm-Sponsored Employee Giving

February 2019

2016
105,426
87,841
11,658
234,362

2017
124,206
85,280
5,525
282,872

2016

2017

2,283
71,320
24,622
2,063
5,553
84,691
10,916
729
139
7,321
244

2,791
87,473
24,766
1,662
5,205
102,160
12,110
360
138
4,991
113

2,353
1,725
1,122
21
5,289
5,891

2,478
2,489
917
18
5,139
5,590

2016

2017

1,040
747
1,787

2,032
809
2,841

589
972
1,561

2,414
1,245
3,659

514
562
1076

26
65
91

2016
1,554
449

2017
1,583
475

Page 21

 Appendix B: Petroleum Product Exports from Washington State

2017
Canada
$968,073,339
Mexico
$465,013,620
Chile
$61,916,443
Australia
$58,608,748
New Zealand
$31,276,949
Brazil
$30,180,000
Saudi Arabia
$27,300,000
India
$24,167,931
Japan
$22,170,345
Oman
$21,297,430
Singapore
$20,617,092
Peru
$19,894,298
United Arab Emirates
$19,728,868
Panama
$19,386,192
Korea, Republic Of
$14,317,784
Malaysia
$10,261,272
Taiwan
$8,171,323
Belgium
$6,467,074
Qatar
$5,400,000
China
$4,916,871
Mozambique
$2,850,000
Thailand
$359,855
Guatemala
$343,256
Indonesia
$299,486
Colombia
$287,549
Dominican Republic
$267,400
Costa Rica
$208,018
Russia
$195,922
Philippines
$133,299
Mali
$84,166
Germany
$67,970
Palau
$62,923
Nicaragua
$49,953
Solomon Islands
$38,400
Afghanistan
$21,036
Ecuador
$12,934
Kuwait
$12,933
Netherlands
$9,843
Federated States Of Micronesia
$9,348
Paraguay
$9,321
Marshall Islands
$8,619
Sri Lanka
$5,400
Bolivia
$4,014
Italy
$3,828
Barbados
$3,135
Other
$0
Total
$1,844,514,187

2016
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45

$1,018,623,622
$453,596,117
$150,595,029
$74,784,981
$28,360,668
$28,308,302
$14,986,407
$6,037,792
$7,846,461
$27,050,602
$83,878,377
$82,683,429
$4,329
$35,418
$44,110
$15,415,359
$17,957,338
$22,159,986
$0
$26,863,615
$0
$459,776
$271,390
$353,631
$127,450
$60,091
$63,644
$155,308
$301,307
$61,227
$4,558
$0
$101,309
$0
$0
$2,981
$0
$12,247,094
$0
$0
$5,441
$0
$0
$0
$0
$4,698,926
$2,078,146,075

1
2
3
6
7
8
14
17
16
9
4
5
42
32
31
13
12
11
44
10
44
19
22
20
25
29
27
24
21
28
41
44
26
44
44
43
44
15
44
44
38
44
44
44
44

Source: WISERTrade

February 2019

Page 22

 Appendix C
The Washington Research Council uses a model of the Washington state
economy constructed especially for WRC by Regional Economic Models, Inc.
Because it allows supply and demand to respond to changes in prices and
wages, and permits substitution among factors of production, the WRC-REMI
model is more elaborate than the standard input-output models commonly
employed to estimate regional economic impacts (Treyz 1993).
The standard input-output model fails to model the numerous capacity
constraints within the economy, the processes that set prices for goods and
services and the responses of consumers and producers to changes in these
prices. In the input-output model, industry and labor supply are perfectly
elastic—so prices and wage rates do not matter.
Prices and wages do matter in the WRC-REMI model. The model divides
the state into two sub-regions: The Seattle Metropolitan District (King and
Snohomish Counties) and the balance of the state. There are 66 private industrial sectors within each sub-region, as well as four governmental sectors.
Within each sub-region the model tracks inter-industry transactions, much as
an input-output model would.
Unlike an input-output model, however, the WRC-REMI model incorporates a number of significant behavioral responses to changes in prices and
costs: The wage rate depends on the supply and demand for labor, migration
and labor force participation rates respond to changes in wage rates, and
consumer purchases of specific goods and services respond to changes in
relative prices and personal income. In addition, producers substitute among
production factors in response to changes in relative factor costs, market
shares respond to changes in regional production costs, and investment rises
in response to increases in output.
This report uses version PI+ 1.7.2 of the WRC-REMI model. We use a custom regional control with the standard responses of government spending to
changes in economic activity turned off. We increase government spending
via the state and local government spending policy variables based on taxes
refiners report paying. Additionally we increase investment using the nonresidential investment policy variable, based on the amount refiner reported investment exceeds that predicted by the REMI model’s investment equation.

February 2019

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