Largest Part Of Recent Gas Price Increase Isn't Due To Supply Costs

by Steve

As the GOP’s $100 rebate idea flames out, along with Big Oil’s PR campaign, there may eventually be serious discussion about how to get this country reoriented away from Middle Eastern oil and onto a path towards more energy independence. To the GOP, the default position is ANWR, which would provide only enough oil years from now to last less than a year, reducing gas prices on average one penny. To economics reporters like Charles Gasparino from Newsweek, the cause is environmentalists and significantly increased demand from around the world.

Yet neither the GOP nor Big Oil apologists like Gasparino mention the following: of the 60-cent per gallon price spike in gas from January 3rd, 2006 through April 10th, 2006 here in California, only 12 cents of that increase was the result of increases in the spot market price of crude oil, indicating that a constricted supply of crude wasn’t the driver behind these increases.

As for the “blame the environmentalists” argument, the price increase isn’t the result of gasoline additives either, since a comparison with Washington State’s gas prices shows a similar increase, where they haven’t mandated cleaner gas.

So if only twelve cents of the 60-cent increase was due to supply costs since January, where did the rest of the cost increases come from?

According to a study done last month for the Foundation for Taxpayer and Consumer Rights, “Approximately 42 cents of the 60-cent increase in gasoline prices is attributable to increased refinery and marketing profit margins for the oil companies.”