Barely a day goes by that some television station does not do yet another story on high gas prices. Most times it is a well-coiffured female reporter standing at a gas station restating the obvious,
“Gas prices just keep going up.” They then cut to tape of motorists filling up their SUVs and saying things like, “This is just terrible. I have to drive but cannot afford to pay this much.” The reporter will then stare sincerely into the camera and say something like, “No one has an answer on why these prices keep going up or when they will return to normal … I’m Mindy Clueless, Channel 15 News.”

The truth is, the reason prices are where they are is very simple. And, as for when they will return to “normal,” welcome to normal.
The price of gasoline, like most things, is determined by the laws of supply and demand. When supply is low and demand is high, we pay through the nose. On average, U.S. consumer demand for gasoline has been increasing 3 percent per year. Conversely, the production of gasoline has not increased to any significant degree.
Despite what some folks would have us think, this is not being caused by a Middle Eastern conspiracy, rather it is our own fault.

Despite a steady increase in demand for fuel, no new refinery has been built in the United States in three decades and only one is in the works. Oil companies are scaling back planned investments in new, expanded, or modernized U.S. refineries rather than increasing them. In 1970, global refining capacity was about 47 million barrels per day. Today it’s about 83.5 million barrels per day, but only 17.5 million of them are refined in the United States.

An effort to remedy the situation, the proposal was killed in Congress last week. In a 43 to 52 party-line vote, Senate Democrats rejected an amendment to the energy bill designed to encourage new refineries and other alternatives for producing transportation fuels.

The amendment would have provided states and Indian tribes with the opportunity to opt into a program to streamline the permitting process. Democrats called the amendment a “giveaway” to the very refineries that are reaping record profits due to high gas prices (caused by the very shortage in refining capacity the amendment was supposed to address). Democrats also insisted the amendment would undermine environmental laws.

While oil executives deserve a share of the blame for this, so do environmentalists. Lawsuits and burdensome regulations have made it very expensive and time consuming to build a refinery in the United States. This same “protect our environment at all costs” mentality is also responsible for preventing the discovery of new oil and natural gas deposits in our own country.

Short-sighted policy makers have been counting on the laws of economics to help with the problem. They assumed that as the price of gas went up, people would cut back: Wrong! We Americans love our cars; we love to drive our cars; and we are not going to let something like the doubling of the price of gas stand in our way. Consumer trends indicate that no appreciable decline in driving mileage is occurring with gas above $3 per gallon.

So, next time you are standing at the pump cursing the high price of fuel, remember to include the oil companies, the environmentalists, the government and yourself in your condemnation.

Until all these groups, the oil companies, the environmentalists, the government, and, yes, you and I, are ready to get serious about the problem and make some serious changes in the way we operate, things are not going to change much.