Gasoline Price - a Classic Political Hysteria

We are having a gasoline price crisis, with prices at the pump going over $3.00 in some areas. Gas Buddy has a good national map of the situation -- prices are especially high in California, Nevada and New York.  See LATimes and Washington Post for general background.  The recent increase in gas prices has a combination of causes, according to the Energy Information Administration.  These include high crude oil prices,  reduced refining capacity, partially related to Katrina and also due to refinery maintenance, the switchover from MTBE to ethanol, and, no doubt the variety of state-specific specifications for gasoline to improve air pollution.  Political uncertainty is not helping the pricing of crude oil.  As James Glassman points out at TCS Daily, we need to build some new refineries and obtain additional sources of oil, as well as engage in appropriate conservation measures.  Applying a "windfall profit" tax on the oil companies, is not the solution -- I have not investigated the year end reports, but it is hard to imagine how the oil companies have achieved a windfall in the face of the costs of Hurricane Katrina and the other storm events last fall.  Further, perhaps profits are in excess because the companies are not plowing back into new plant and equipment due to all of the obstacles facing them on that front. If we as a body politic are not interested in greater production to reduce prices, then we need to live with the higher prices.  See also the editorial at the National Review , Knowledge Problem here and here.

Comments

[Ryan M. Ferris]

The simple answer to America's debilitating energy problems is at it always has been: Nationalize Big Energy Now. Back when people still had a shred of critical thinking abilities you used to see bumper stickers that said exactly that. Now we have "energy poverty" and "energy welfare" where our government subsidizes millions of American energy bills through direct handouts like LIHEAP. The next step we will see is Congress (using deficit financing of course) construct similar help for low income drivers. Amazing. Russia, Iran, Venezuela are laughing all the way to the bank. Maybe someone with half a brain will e-mail me and try to explain why they think the monopoloid capitalism that characterizes American energy production and refining has any relation at all to market competitiveness efficiency in American...or national security.