Minor Thoughts from me to you

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