Rising Gas Prices and Analysis of Why

The radical right has brought up gas prices and yup they are rising here. We are over $4.00 nearby. So putting my eye to the web to see what factors there are finds some interesting issues. One of the factors that the media downplays is the difference between winter gas and summer gas. So here are two sites that talk about the difference. All this leads me to 1) why does the EPA require these formulations and are they effective now with ethanol and MTBP and 2) why do gas refineries 'shut down' to change over and why isn't there enough winter gas on hand to make the transition smoother than it is. and finally 3) I wonder what effect speculators have on winter and summer gas knowing there is a potential 'shortage'
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http://ask.cars.com/2009/02/whats-the-difference-between-summerblend-gasoline-and-winterblend-gasoline-does-it-affect-my-cars-pe.html


http://zhome.com/ZCMnL/PICS/winterGas/winterGas.html

A good friend altered the image from the first link and added took the chart of gas prices over the last 6 years, and overlaid the chart of the Dow for the last 6 years (the dark green line). His information seems to support the notion that gas prices are being driven far more by speculators than by natural forces of supply and demand. So that is factor No. 2 to me. (thank you Mark)



It isn't clear how much speculators have affected the prices of gas, but Senator Bernie Sanders has looked into home heating oil for his state of Vermont and found that up to 40% of the price of a barrel of oil is based on speculation. Sanders Letter

Another factor I've run into is gas refinery space. When you look into the quantity of gas refinery space in the US, you find that there isn't a lot of extra capacity. One reason given has been the regulations, except a quote I saw indicates that between 1975 and 2001, only 1 permit had come to the federal government to build a refinery. Even during the go-go Reagan years. There is speculation that gas refiners are 'slowing capacity' and closing refineries in the US in order to maintain a higher gas price. Why spend millions to only lower prices and lower your profit margin. Also it appears that larger refiners are pushing out smaller refiners thereby condensing the capacity and consolidating it to fewer players.

As my friend Mark said "At some point, conservatives need to acknowledge that the "free market" has been taken captive in many cases, and decide if they really support free-market capitalism or if they're just going to be collaborators with the econ-terrorists who are holding it hostage." It is true, the difference between a free market and a collusion isn't very obvious to the consumer. The drill-baby-drill concept is great if you can take that oil and make gasoline out of it. The refineries are running at or near capacity, so adding more oil seems out of the question. So the drill-baby-drill concept means more oil on the global market and therefore sold to foreign countries.

In the end, it is never that simple as drill more or de-regulate the industry. Like most things in business, government only knows as much as it can ask. This is called regulation. In a true free-market system, someone should get the idea to expand gas production at a plant so as to put more gas on the market, or reduce the costs so that they can get more profits. But no one is because no one wants to upset the great deal they have.