Higher Fuel Prices: As Regular as the Seasons

By March 26, 2007Energy

Since today is turning into Energy Blog Monday here at Shopfloor.org, we offer one more post about the politics of fuel. As prices at the pump inch upwards, prompting the usual complaints, we note that government regulations, including environmental rules, and the iron law of supply and demand are all to blame.

Ronald Bailey at the libertarian-minded Reason lays it all out.

The EIA calculates that crude oil accounts for 54 percent of it. Distribution and marketing are responsible for 15 percent. Refining is another 11 percent and taxes add 20 percent. The only conspiracy behind increasing gas prices is in plain sight–government fuel mandates and taxes. They may be worth it but they do cost consumers. Also, it is clear that looking back over the past ten years, the fluctuations in the price of crude oil swamp all of the other factors. Back in 1999, when a gallon of gas cost $1.09, crude oil accounted 37 percent of the price of a gallon of gasoline.

What’s the bottom line for this year? All the analysts basically agreed that gasoline prices are probably close to their peak for the year and that they will fall soon. Prices may rise again toward the end of the summer, but unless all hell breaks loose-say a war with Iran or gigantic hurricanes assaulting the Gulf coast-gas prices should not exceed $2.75 this year.