Gas prices have hit record highs so media morons and congress critters are once again claiming the gas companies are ripping us off. Did they say the gas companies were giving us a well deserved discount when gas prices dropped below $2 earlier this year?

I usually buy my gas at an intersection with gas stations on three of the four corners. On Monday the el cheapo station had prices 20c lower than BP and Sunoco. The lines there were so bad I drove off to another gas station and paid the 20c extra.

Interestingly, when gas prices hit $2, diesel prices were 40c higher. Now, diesel prices are 40c lower than gas prices. If the oil companies were ripping us off, wouldn’t they have kept diesel prices higher than gas prices? They couldn’t because of the laws of supply and demand. Diesel demand is mainly based on commercial activity. It varies season by season, but not by much. Gas demand is based on commercial and recreational demand. In summer, people drive much more. So demand goes up.

Of course, in a regulated market, the laws of supply and demand are distorted. The EPA requires oil companies to change their blends season by season, and region by region. Not surprisingly, the regions with the cheapest blend to produce get the cheapest gas.

The other big factors affecting gas prices are feed-stock prices, set by world-wide demand for oil, and refining cost. The US has not been able to build new refineries in decades, because Greenies are Nimbys. However, existing refineries have been extensively modernized and upgraded. I wouldn’t peg the lack of refineries as a constraint so much as the need to meet EPA mandates. The bigger cost is having to produce so many regional/seasonal/ethanol blends to meet EPA and local rules. How do we know this? Because, after Katrina, the government relaxed the EPA rules. Despite a huge loss in refining capacity, gas prices stayed reasonable after Katrina.

The US could impact gas prices if it expanded its own production of oil. However, the impact on prices would not be dramatic. The reason is that oil is a fungible commodity. Any extra US production would enter a world market. That’s not to say the US should not relax the rules and regulations that forbid oil companies from exploiting domestic resources. Every new non-OPEC producer will help break a dangerous cartel.

Gas prices are high today. They will fall. With better governance they could fall even further.

Al Gore’s movie has a dramatic graph showing how global temperatures rise as CO2 concentrations rise. Unfortunately, for Al, his graphs also show how global temperatures fall as CO2 concentrations fall. Which caused what? If rising CO2 concentrations cause global temperatures to rise, why did global temperatures reach a peak and then decline? If rising global temperatures cause CO2 concentrations to rise, why did global CO2 concentrations reach a peak and then decline? Obviously, Al Gore has confused correlation with causation.

Another factor is at play, and the shrinking of Mar’s polar cap suggests a possible solution; variations in the Sun’s energy output. Temperatures have risen, but not for the reasons claimed by Global Warming demagogues. They will decline, but the Global Warming demagogues will have magically transformed themselves, yet again, into Global Cooling demagogues.

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