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What Caused High Gasoline Prices?

The U.S. Energy Department is investigating the record gasoline prices during the run-up to the Labor Day holiday.

What happened?

According to this report, holiday travel was expected to be at an 8-year high, while there is lower than normal supply of crude oil from Venezuela, Nigeria, and Iraq. Despite supply disruptions, U.S. imports in August averaged 10.1 million bpd, 5% higher than last year. Crude oil prices were over $30 per barrel throughout August.

The northeast blackout temporarily shut down seven refineries in the United States and Canada. There were also technical problems at several California refineries, compounded by sending fuel to Arizona to deal with the gasoline crisis that resulted there from the rupture of a pipeline at the end of July.

(The problem was particularly bad in California because it requires the fuel additive MTBE, making it more difficult for the state to quickly use gasoline imported from other areas. California Lt. Gov. (and candidate for Governor) Cruz Bustamante has announced his support for a proposal to regulate gasoline prices in the state. Do not vote for Bustamante, he's an economic dolt. Gasoline price controls would be disastrous.)

High demand, costly crude oil, refining disruptions, and transportation disruptions all contributed to higher gasoline prices for consumers. Who needs a Big Oil Conspiracy Theory™ when rising prices are a predictable result of the most elementary economic analysis?

Anecdotally, the supply problems were becoming evident in mid-August. One local gas station where I tried to fill up had almost run out (they only had premium left) and the attendant told me they were having trouble finding a reliable supplier. Their prices rose 20¢ over the next few days.