Supply and Demand

Those are the two things that should determine the price of a commodity. If you reduce the supply, then, by golly, the price of what is available will, and should, go up. That is the way the system works.

I hate paying over $3 for a gallon of regular, but I also know that the taxes included in that amount to nearly a quarter of the price and that there plenty of steps between the ground and my tank and that, reports of "record profits" aside, ain't a whole lot of "price gouging" going on. In fact, the taxes collected by the feds and states are the biggest chunk of money going to the entities that have been doing absolutely nothing to see that that gasoline gets to the pump. That might be considered gouging.

House panel votes to extend ban on most offshore drilling

Remind me again. When was the last oil refinery built in California...or New York…or Massachusetts? Before we go looking for price gougers, perhaps we should look at the supply side of the equation.

UPDATE: Jeez this internet thingy has all the answers. Do a little surfing and they just pop out at you.

Behind high gas prices: The refinery crunch

So why hasn't a new refinery been built in the U.S. since 1976?

So there’s my answer. No refinery’s been built, not just in those three states, but anywhere in the country, since 1976. But there has been an increase in refinery capacity.

While refinery capacity may not be growing as fast as demand, it is growing.

For example, Drevna noted that expansion projects at the nation's existing refineries have had the effect of adding the equivalent of a brand new refinery every year. That increase came despite mandates for cleaner gasoline and diesel fuel, which take longer to make.

But what about new, cleaner refineries here in the states?

First off, experts note, gasoline, like any commodity, is subject to big price swings. After all, in the late 1990s it was selling for less than $1 a gallon, hardly an encouraging number if you're a refinery exec looking at making a decades-long, multi-billion dollar investment.

While retail gasoline prices are currently near record highs at just below $3 a gallon, where they might be five years from now is a matter of debate.

Some experts say new investment, in both alternative energy and conventional sources, will boost supply and could cut prices in half. If a global recession hit, the drop could be even more dramatic.

Others say rampant demand, especially in the developing world, will keep prices from going anywhere but up. For an oil executive trying to decide on a refinery investment, picking who's right is a tough call.

Secondly, stringent environmental laws and effective community organizing have made it very difficult to build a new refinery in the U.S.

"Everyone is quick to say "look at these refiners, they're driving up the price,'" said Phil Flynn Flynn, senior market analyst at Alaron Trading in Chicago. "But if I wanted to build a refinery tomorrow, I couldn't do it."

And then there's the public's newfound concern over global warming and its supposed commitment to do something about it. President Bush himself has called for a 20 percent reduction in gasoline use over the next 10 years.

"What refining executive in their right fiscal mind would say, gee, we need to add refining capacity right now," said Drevna at the refiners' association.

So demand elsewhere in the world where the governments may e more amenable to construction have siphoned off refineries. Then there’s the NIMBY crowd that would dearly like lower prices at the pump but not at the cost of either oil exploration or refinery construction within our own borders. And finally, there are governmental policies at the state and federal level geared toward the reduced consumption of gasoline in the near future.