Higher Prices at the Pump

It's all over the news, we are going to pay more for gasoline this summer. You probably won't here about the Nigerian rebels that have shut down 25% of that country's oil production, and you definitely won't here about the hash of an energy bill that the Great Sausage Factory gave us. The May switchover to ethanol from MTBE as an oxygenate additive is going to mess with the highly complex gasoline supply chain and higher prices will result. All this for some perceived environment benefit. Alas, the vastly more environmentally fervent Europeans haven't banned MTBE and retain the flexibility to blend it in their fuel, which they are doing when the price of ethanol make substitution of MTBE economical. There is a deeper debate here, but my main point is that retaining flexibility for the supply chain to react and adjust is a key factor in keeping prices stable, and even to reducing them. Somehow though our putatively very smart elected leaders think that mandating and hamstringing industry to react and adjust is the way to go. Yet more evidence of what I have said before "we have high gas prices in the US because we want high gas prices." No, we don't consciously desire and demand high prices, but we consistently enact policies (or refuse to oppose policies) that ensure, due to the laws of economics, higher fuel prices.