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Don't Blame Obama for High Gas Prices

Don't Blame Obama for High Gas Prices →

There are a couple of things that I really wish the general public would understand. One is that gas prices (and oil prices) aren't, broadly speaking, under the control of any President. No President gets to take credit for prices falling and no President should take the blame for prices rising.

Is President Obama responsible for spiraling price of gasoline? Republicans say yes, but the facts say no.

Why have gasoline prices increased since the start of the year? The simplest explanation is that the price of crude oil has increased. Specifically, the spot price for Brent (North Sea) crude has increased $16 a barrel since January. Given that there are 42 gallons to a barrel, that works out to a 38 cent increase in the price of a gallon of oil. Spot prices for gasoline trade in New York have increased about 41 cents per gallon over the same time frame. So there you go.

Why is the price of North Sea oil relevant to the price of gasoline in the United States? Well, we import gasoline refined in Europe from North Sea crude. Even though these imports constitute less than 10 percent of U.S. gasoline consumption, they are necessary to satisfy domestic demand and their price sets the market price for all gasoline regardless of whether other cheaper crude sources are used to refine most of our gasoline.

You can also listen to the podcast version of this article.

The Oil Market Panic

The Oil Market Panic →

Richard Epstein looks at the recent run up in gas prices and concludes that it's mostly because of an increasingly hostile posture towards Iran.

Without question, the problem can be traced back to a renegade Iran. For good and sufficient political reasons, the West has come to see that the Iranian nuclear threat is not just bluster. Indeed, it poses far greater risks to world peace and the political order than even a major disruption in oil supplies.

Hence an anxious West has now put into place a reasonably effective concerted effort to cut off Iran from the world’s banking system, and to block the use of Iranian oil internationally, which has been made easier by the Saudis’ willingness to expand their own shipments into the world markets. Nor have the Iranians sat back idly. They have cut off exports to the United Kingdom and France, a move that is largely symbolic. But the Iranian threat to close the Strait of Hormuz, through which about one-third the world’s oil supplies travel, is not symbolic. Nor is the movement of the U.S. aircraft carrier, the U.S.S. Abraham Lincoln, into the Strait of Hormuz, merely symbolic.

For both the short and the middle term, these developments have driven the base-line price of Brent crude from the North Sea up to around $119 per barrel. That translates into a potential price at the pump of about $4.25 per gallon, which undoubtedly will eat into the pocketbooks of many Americans.

He concludes that the worst possible thing, for gas prices, is for politicians to start looking for "something to do". (And, yes, he criticizes both Democrats and Republicans on this issue.) Rather, we should sit back and let individuals and companies figure out the best way to react to the increased risk and the possibility of sudden shortages.

The question on the table is how best to respond to the disruptions in oil supplies, not to pretend that these disruptions do not exist. On this score, the great advantage of a market system is that it forces Mr. Coudle (and everyone else) to think hard about the relative value of the goods and services he consumes and to make cutbacks in a cheap and rational fashion. In both good times and bad, people are always having to decide which goods and services to spend their incomes on, and which to forego.

Price movements give them an accurate, instantaneous, and impersonal picture of how other people value various goods and services. When oil prices rise, its least valuable uses are the first to drop out of the system. The decisions are typically made on a continuous basis, so that if some people find that they have cut back purchases by too much (or too little), they can increase (or decrease) their purchases in the next pricing period. Spurred on by these price increases, people can also make changes in their spending patterns elsewhere to offset the inconvenience of the higher prices for oil products. Purchasing a hybrid, insulating your home, and moving closer to work are just some of the many ways to save money. Good luck to Mr. Coudle, who provides an object lesson in how that task should be done.

The great risk is that the government will undermine the market by resorting to centralized devices to cap the price increases or to dictate its collective vision of the just price. Now is the time to recall the lessons of Friedrich Hayek’s best writing, the scholarly essay “The Use of Knowledge in Society” (1945), which is about the superiority of a decentralized price mechanism in response to system-wide shocks. As he reminds us, “The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all separate individuals possess.”

The Ethanol Scam

Rolling Stone on ethanol. They're not complimentary.

The Ethanol Scam: One of America's Biggest Political Boondoggles

The great danger of confronting peak oil and global warming isn't that we will sit on our collective asses and do nothing while civilization collapses, but that we will plunge after "solutions" that will make our problems even worse. Like believing we can replace gasoline with ethanol, the much-hyped biofuel that we make from corn.

Ethanol, of course, is nothing new. American refiners will produce nearly 6 billion gallons of corn ethanol this year, mostly for use as a gasoline additive to make engines burn cleaner. But in June, the Senate all but announced that America's future is going to be powered by biofuels, mandating the production of 36 billion gallons of ethanol by 2022. According to ethanol boosters, this is the beginning of a much larger revolution that could entirely replace our 21-million-barrel-a-day oil addiction. Midwest farmers will get rich, the air will be cleaner, the planet will be cooler, and, best of all, we can tell those greedy sheiks to fuck off. As the king of ethanol hype, Sen. Chuck Grassley of Iowa, put it recently, "Everything about ethanol is good, good, good."

This is not just hype -- it's dangerous, delusional bullshit. Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption -- yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

Here's the best single quote in the article: "'Corn ethanol is essentially a way of recycling natural gas,' says Robert Rapier, an oil-industry engineer who runs the R-Squared Energy Blog."

Refinery Problems Lead to Higher Gas Prices

Do you wonder why gas has been so expensive this summer? Wonder no more. Gas Prices Rise on Refineries' Record Failures - New York Times

Oil refineries across the country have been plagued by a record number of fires, power failures, leaks, spills and breakdowns this year, causing dozens of them to shut down temporarily or trim production. The disruptions are helping to drive gasoline prices to highs not seen since last summer's records.

These mechanical breakdowns, which one analyst likened to an "invisible hurricane," have created a bottleneck in domestic energy supplies, helping to push up gasoline prices 50 cents this year to well above $3 a gallon. A third of the country's 150 refineries have reported disruptions to their operations since the beginning of the year, a record according to analysts.

There have been blazes at refineries in Louisiana, Texas, Indiana and California, some of them caused by lightning strikes. Plants have suffered power losses that disrupted operations; a midsize refinery in Kansas was flooded by torrential rains last month.

American refiners are running roughly 5 percent below their normal levels at this time of the year.

Many factors have led to the rise in gas prices, including disruptions in oil supplies from places like Nigeria and Norway. But analysts say the refining bottleneck in North America has been one of the main drivers of higher energy prices this year.

The refining crunch has pushed wholesale gasoline prices up 35 percent this year and has contributed to a 23 percent gain for crude oil prices. Oil futures in New York closed at $75.57 a barrel on Friday.

The solution: build more refineries. Increase capacity. The problem: Congress.

Meanwhile, refiners have been scrambling to meet a raft of environmental regulations, phase out toxic additives, add ethanol to the fuel mix and introduce new ultralow sulfur standards for gasoline and diesel. Industry insiders attribute much of the fragility of refining operations to the difficulty of making these cleaner fuels.

No refineries have been built in the United States in over three decades, because refiners say they are too costly. Instead, they have been expanding their existing refineries.

But with a third summer of high gasoline prices, lawmakers are debating legislation they claim would punish oil companies for exploiting the tight supply situation and engaging in "price gouging." At the same time, they are pressing refiners to produce more fuel.

New refineries are super expensive. Companies would need to amass a large stockpile of cash -- earned from large profits -- before they would be willing to build a new refinery. But Congress keeps threatening to impose a windfall profits tax on the industry. Whose going to invest in a new refinery when your income could disappear at any time, courtesy of the U.S. Congress?

Note also, the mandates for new fuel mixes. It's hard to keep a refinery running when Congress and state governments mandate ever more exotic fuel mixtures. Each new gasoline blend makes the entire refining process a little more fragile. That leads to breakdowns and higher prices.

Once again, blame Congress for high gas prices. Don't let them trick you into blaming the oil companies.

This entry was tagged. Gasoline Oil

Taxes Make Gas Expensive

Hold on to your wallets -- the Senate is in session. Senators Grassley and Baucus plan to make your gasoline even more expensive.

A proposal to hit oil companies with $29 billion in new taxes advanced in the Senate on Tuesday, targeting the money to energy conservation, wind turbines, electric hybrid cars and clean coal technology.

The massive tax package, double what Democrats had discussed as recently as last week, is "designed to promote clean and sustainable energy," said Sen. Max Baucus, D-Mont., chairman of the Finance Committee that approved the measure by a 15-5 vote.

It is expected later this week to be added to energy legislation being considered by the full Senate.

It gets worse.

The American Petroleum Institute, the oil company trade group, said in a statement that the taxes "will discourage new domestic production, discourage new investments in refinery capacity and would lead to the loss of good-paying U.S. jobs."

As I wrote previously, Congress has been discouraging investments in refinery capacity for decades. Our already limited refinery capacity is largely responsible for the current high price of gasoline. We should be doing everything in our power to increase refinery capacity -- not decrease it more.

Baucus said he expects the oil companies to complain, but he doesn't believe the taxes "will substantially change these companies' incentives to produce energy."

Maybe not. But it will substantially change the price that these companies charge to consumers. Senator Grassley doesn't realize that -- maybe he's been smoking something green?

Grassley said the "narrow change" in tax policy "seems likely to have little if any effect on domestic production" or the price of gasoline at the pump.

Uh-huh. Raising taxes by $29 billion will have "little if any effect" on prices. How long has he been out of touch with reality? Also, does he have any plans to return to reality?

How expensive could this all get? The Heritage Foundation did some quick research and put together a state by state analysis for you. Living in Wisconsin, I could see prices rise from $3.29 a gallon (May price) to $3.60 a gallon next summer. By 2016, gasoline could rise as high as $6.62 a gallon. To Senators Grassley and Baucus: "Thanks a lot. I didn't really need that extra $113 in my monthly budget anyway."

As if this wasn't bad enough, Congress would like to make your car more dangerous.

Despite Congress' repeated efforts to repeal the laws of physics in favor of something more politically correct, the fact remains that bigger is safer when it comes to vehicle size. Supporters of increasing Corporate Average Fuel Economy (CAFE) standards ignore what millions of minivan and SUV drivers already know: They stand a much better chance of surviving an accident than drivers of lighter, more fuel-efficient subcompacts. The problem is that significantly improving fuel economy means cutting average vehicle weight. The curb weight of a typical family sedan can be reduced from the present 3,200 pounds to, say, 2,800 pounds. But maintaining the same level of safety with advanced air bags, refined crush zones and other technological fixes could make the lighter family sedan unaffordable for middle-class buyers.

Advocates of higher CAFE standards claim that the smaller vehicles will pollute the air less and consume fewer natural resources. As a result, from a global perspective, such vehicles will do less damage to the environment and fewer people will die or get sick as a result of emissions-related causes. But most Americans with families to transport and businesses to move see a much more immediate and concrete health and safety benefit in driving vehicles that serve their purposes without putting at risk their lives and those of their loved ones. Only through force and coercion will they trade their practical vehicles for the smaller, less useful and often more expensive "green" vehicles favored by higher CAFE advocates.

The land of the free -- she ain't quite what she used to be.

This entry was tagged. Gasoline Oil Taxes

Politicians Write Biofuel Checks They May Not Be Able to Honor

Recently, Congress has been going nuts over ethanol production. Government money has been thrown at every imaginable ethanol-related project.

If the current tax credits, grants and loan guarantees are extended, the package would cost taxpayers an additional $140 billion over the next 15 years. New proposals under consideration in Congress could raise the tab to $205 billion.

The biggest single item would be an extension of an existing 51-cent-a-gallon ethanol tax credit, scheduled to expire in 2010. It would cost the federal government an extra $131 billion through 2022 under a fuel mandate that recently cleared by the Senate Energy and Natural Resources Committee. (It would cost $18.36 billion in 2022 alone.)

Besides the ethanol tax credit, other current incentives include a $1-a-gallon biodiesel tax credit, a subsidy for service stations that install E85 pumps, spending by the Agriculture Department on energy programs, and various other Energy Department grants and loan guarantees.

Some lawmakers want to provide aid for ethanol infrastructure since ethanol is too corrosive to be transported through existing gasoline pipelines. ... Another bill would establish a Strategic Ethanol Reserve for years when corn harvests were reduced by droughts. ... a House Agriculture subcommittee approved a proposed new energy provision that would provide $2 billion in loan guarantees for new biomass plants and $1.5 billion for research into cellulosic ethanol technologies.

The only problem -- nobody's quite sure how to pay for any of this. Especially as Democrat presidential candidates are proposing billions in new healthcare and education spending. All of those billion have to come from somewhere, but Democrats have been pledging to keep the budget balanced. Obviously, those are code words for "hike taxes on the rich to pay for our new toys", but even tax hikes on the rich only go so far. After all, how many separate billion dollar toys can repealing the tax cuts for people who earn $200,000+ really pay for?

As always, the best quote is saved for the end of the article.

Rep. Tim Holden, D-Pa., who chairs the House Agriculture subcommittee dealing with energy, contended that "we need a Manhattan Project ... we need to be less dependent on energy."

Less dependent on energy? As in, the entire nation should start using less energy? How? Ban air conditioning? Ban driving? Mandate thermostat limits in the winter? Take away our iPods, cellphones, laptops, and digital cameras?

I'm afraid Representative Holden is a bit nuts. As are all of these energy subsidies. Knock it off. When an innovator finally comes up with a better, cheaper way to produce energy, the world will stampede to his doorstep. Until then, quit throwing tax money at the problem. None of you idiots in Congress know how to produce energy any more efficiently, so stop using my money to pretend like you're making good investments.

You're worse than a trust-fund teenager taking Daddy's stock portfolio for a test drive. Knock it off already.

UPDATE: Not only that, but the rush to invest in ethanol could lead to a food shortage down the road:

A recent study conducted by the Center for Agricultural and Rural Development at Iowa State University (which receives funding from grocery manufacturers and livestock producers) reported that U.S. ethanol production could consume more than half of U.S. corn, wheat and coarse grains by 2012, driving up food prices and causing shortages. The study estimates that booming ethanol production has already raised U.S. food prices by $47 per person annually. In Mexico, protests have already erupted over the high price of corn tortillas, a staple food in the local diet.

Planting more corn is one solution, but that means planting less of other crops that are also widely used in foods, such as soybeans and wheat. Tilling fallow land could create more growing space for corn, but might lead to soil erosion and impacts on wildlife habitats.

According to a December 2006 study by the International Food Policy Research Institute, producing enough ethanol to fuel all of the world's vehicles would require five times more corn than is planted today and 15 times as much sugar cane.

So. Ethanol investment isn't just a waste of taxpayer dollars. It could also have some very detrimental effects on agricultural production, land management, and food prices. Quit distorting the market and have the patience to let a level playing field reveal the next energy technology. Please.

Biofuels Make Gas Expensive

The Times is surprised to learn that the recent emphasis on biofuels is making our gas more expensive.

In hearings before Congress last year, oil executives outlined plans to increase fuel production by expanding existing refineries. Those plans would add capacity of 1.6 million to 1.8 million barrels a day over the next five years, for an increase of 10 percent, according to the National Petrochemical and Refiners Association.

But those plans have since been scaled back to more than one million barrels a day, according to the Energy Information Administration, an arm of the federal government.

"If the national policy of the country is to push for dramatic increases in the biofuels industry, this is a disincentive for those making investment decisions on expanding capacity in oil products and refining," said John D. Hofmeister, the president of the Shell Oil Company. "Industrywide, this will have an impact."

The concerns were echoed in a recent report by Barclays Capital, which said the uncertainty about the ethanol growth "will do little to accelerate desperately needed investment in complex United States refining units."

"Indeed, it is likely to deter and further delay investment, if not rule out many refinery investments completely."

The oil companies say their views on the longer-term prospects for fuel reflect simple economics. Because of the enormous investments required to expand refineries, they say they have no other choice but to re-examine their plans in light of the calls for more ethanol fuel, regardless of how realistic they may be.

Not that any of this matters to Congress. Now that they've injected a huge dose of uncertainty into the gasoline market and driven prices sharply upwards, they're prepared to tax away any profits that might enable the oil companies to actually handle the market uncertainty. (High profits might give the companies enough of a margin to both invest in refinery capacity and invest in ethanol production. Unfortunately, profits are evil so we can't let that happen.)

Let's not forget the other place that oil industry revenues have been going:

The refining industry has also spent vast amounts "” more than $50 billion in the last 10 years "” to meet requirements to produce cleaner fuels, according to the American Petroleum Institute, the industry's main trade group.

That's a lot of money. And Congress could mandate something else in the future that will cost just as much -- or more. These are the risks that oil industry executives have to face every day of every year. When uncertainty about future expenses goes up, so do prices.

In case you think that everything will be solved if we just move from corn based ethanal to cellulosic ethanol, not so quick:

The economics of cellulosic ethanol, made from nonfood crops and agricultural waste, are also unclear. Since cellulosic ethanol, still at an experimental stage, is twice as expensive as corn-based ethanol, there are currently no commercial-scale cellulosic plants.

In addition, Mr. Goldstein said, an emphasis on ethanol might lead to increased volatility in fuel prices.

"If we get a bad corn crop, we will end up paying for it at the pump and on the food shelves," he said. "We are not buying security. We are increasing volatility."

While Congress was busy thinking about reducing our dependence on foreign oil, they forgot to think about reducing our dependence on fickle weather patterns. When was the last time that the entire nation had to worry about whether or not the farmers would have a bumper crop of corn? Thanks to Congress, we'll be able to experience this old-fashioned form of worry all over again.

Rather than blaming the oil industry for high gas prices, Congress needs to take a long hard look at their own behavior. Then stop it.

This entry was tagged. Gasoline Oil Taxes

Gasoline Price Gouging?

Edmund Andrews has a nice op-ed in the New York Times. He talks about the recent rise in gasoline prices and the claims that oil companies and station owners are gouging consumers. As usual, it turns out that your federal government is the culprit, not the savior.

The Energy Information Administration is predicting that crude oil prices will average about $66 a barrel this summer, versus $70 last summer. But it predicts that gasoline will average about $2.95 a gallon this summer, up from an average of $2.84 last summer.

INDUSTRY executives say the anomaly reflects a temporary drop-off in refinery activity, partly because of scheduled maintenance and partly because of unscheduled interruptions. On top of that come ethanol prices, which have soared, because refiners now blend a small percentage of ethanol into standard gasoline.

Why is the price of ethanol soaring? Why is a small amount of ethanol blended into each gallon of standard gasoline? Congress mandated it, of course! Be sure to thank them the next time you fill up.

The broader issue is that refinery capacity has not kept up with American demand for gasoline. Oil companies, caught with vast amounts of excess refining capacity in the early 1980s, systematically reduced capacity during the long lean years when energy prices and profit margins were the pity of Wall Street.

In theory, the allure of fat profits will attract heavy investment in more refinery capacity. And John Felmy, chief economist at the American Petroleum Institute, told reporters last week that oil companies have indeed been investing heavily in recent years.

In theory, yes. But your Federal government is threatening those investments:

But Congress could face an entirely new quandary in its desire to expand the use of renewable fuels. President Bush has called for producing 35 billion gallons a year of alternative fuels "” from cellulosic ethanol to coal-based diesel "” by 2017. Congressional Democrats might be even more aggressive.

If that's the plan, will oil companies want to invest in more refineries? "You've got to ask whether the demand will be there," Mr. Felmy said.

It's time to tell Congress to quit mucking about with the nation's energy supply. And, if they do insist on mucking around with it, to quit blaming the oil companies for the results of Congress's decisions. Once again, we see that our Congress is about as dignified as a class of first graders. And has about the same sense of responsibility.

This entry was tagged. Gasoline Oil

Creating an Energy Crisis

Instead of using our oil ourselves, we may soon be watching Cuba use them on behalf of China and India. Does something about that sound wrong? It sure does to me.

We can do something about the potential encroachment on our oil fields by lifting the bans on off-shore drilling and increasing the domestic production of oil and natural gas. The Times notes that we could become self-sufficient for energy for the next generation just on the known oil and gas reserves off our shores, and that does not count the ANWR preserve. The commodities market for oil would deflate with the US running on its own energy production, greatly reducing the revenue to potentially dangerous regimes. At the least, we can shed our trade with Venezuela and the Middle East, focusing on imports from Canada and Mexico instead, and extending the life of our reserves in the process. That would send a message that we have the will to reach self-sufficiency as well as remind some regimes how much they rely on American petrodollars and the inflated price of oil for survival.

Instead of providing for our own needs -- thus lessening our dependence on Venezualen oil and Iranian oil -- we're content to "protect the environment" and ignore our energy needs. While I have my (large) differences with the Republicans in Washington, the Democrats increasingly seem to be bent on stupidity.

Instead, we will probably continue to dream up conspiracy theories about greedy oil companies which have few investment choices, given the restrictions on drilling and refining that the US has imposed on the domestic industry. And while we travel through the fascination of paranoia, we will allow our economic and military rivals to steal our reserves out from underneath us -- literally -- and pretend that their drilling somehow doesn't carry the same environmental problems as our drilling would.

(A tip o' the hat to Captain Ed. The analysis is his, I'm just passing it along.)

Keeping Gas Expensive

Senate Democrats are, apparently, in favor of making sure gas stays expensive. How else do you explain this FoxNews story:

Idaho Gov. Dirk Kempthorne's nomination for interior secretary could run into trouble from Senate Democrats who want to use it as a bargaining chip to stop more oil and gas drilling in the Gulf of Mexico.

[Sen. Bill] Nelson [D-Fla], citing the potential for environmental damage, said Wednesday he would "keep all my options open" for delaying the nomination. "I have nothing personally at all against Governor Kempthorne," Nelson said after meeting with Kempthorne, a former senator.

When we need as much oil as we can possibly get, the Senate is more concerned with making sure we can't use any of our own.

Explaining Expensive Gas

Yesterday, the price of a gallon of gas in Madison jumped up to $2.79 a gallon. I have every expectation of seeing it go higher over the next several weeks and months. Why is it so expensive? Well, there are several factors at play.

First of all, the demand for gasoline is starting to increase. The weather is getting warmer and people want to travel more: to the park, to the grocery store for cookout supplies, to State Parks for get-togethers, to the Wisconsin Dells, etc. Simple supply and demand: as the quantity demanded increases, the price will tend to increase as well.

Secondly, the supply of gasoline may be decreasing. Many cities and regions regulate the type of gasoline that can be sold and used. They require one blend of gasoline for winter driving and another blend of gasoline for summer driving. As the refineries switch from winter production to summer production, supplies of gasoline will drop. It will take time for the refineries to fully gear up for the summer blend of gasoline. Until that happens, supplies of the summer blend will be limited. As the quantity supplied decreases, the price will tend to increase.

Thirdly, taxes. Every person in the U.S. pays 18.4 cents a gallon in Federal gas taxes. We Wisconsin residents are privileged to pay another 31.1 cents a gallon in state gas taxes. I pay a total of 49.5 cents a gallon in taxes. That means that 17.7% of the price of gas is tax related.

Fourthly, gasoline additives. Federal regulators are concerned with reducing the amount of pollution produced by gasoline. To accomplish this, they require that oil refineries put pollution reducing chemicals into the gasoline. MTBE used to be the preferred additive. However, in March of this year, federal regulators started requiring all oil companies to use ethanol instead. This is, or will be, a problem. Midwest ethanol producers were already struggling to keep up with the demand for ethanol before it was mandated as an additive for all gasoline sold in the United States. The demand for ethanol is now far, far greater than it had been. In additional, ethanol is more expensive to transport and to store than MTBE was. To put it bluntly, this "simple regulatory change" could add another 30 cents to the price of a gallon of gasoline.

Finally, balkanized gasoline markets. For most products, supplies can move freely from one region of the country to another. If there is a shortage of (for instance) wood in New Orleans, New Orleans businesses can buy more wood from other areas of the country. If there is a shortage of steel in Manhattan, construction firms can buy more steel from Indiana. The gasoline market doesn't work this way, unfortunately. Many cities and states mandate unique blends of gasoline. California has a very strict set of requirements. Milwaukee has another set. Buffalo has a third set and New York City has yet another. Most of the Midwest requires different gasoline than most of the East Coast.

All of these requirements are mutually exclusive. Milwaukee drivers can't use Buffalo gas and California drivers can't use gas from New York City. If New York City faces a gasoline shortage, there is no one to buy extra supplies from. Thus, the price of gasoline will sharply increase in New York City -- but nowhere else. If New York City drivers were free to use gasoline from other regions, then New York City gas station owners could simply import more gasoline from Upstate New York, New Jersey, or other surrounding regions. Sadly for NYC drivers, it is illegal to do so and they simply have to suffer with higher gas prices.

These five factors: increasing demand, (temporary) decreasing supply, taxes, federally mandated gasoline additives, and balkanized markets have a large influence on the price of a gallon of gasoline. Of those five factors, three are government created. Sad to say, your government has a larger influence on the price of gasoline than the oil companies do. As a matter of fact, over the years, the Federal government alone has "earned" more money from gasoline than the oil companies have.

As you drive this summer and watch the steady climb of gasoline prices, remember who to blame. Your state and federal representatives will tell you that greedy oil executives are ripping you off. What your representatives won't tell you is that their own greed will have more influence on the price of gasoline than that of the oil executives. What your representatives won't tell you is that their rules and regulations concerning what gasoline you can put into your car will affect the price of gasoline far more than the greed of oil executives. They won't tell you, so you will have to remember -- and hold them accountable for their actions.