What’s Causing High Gasoline Prices?

The US Senate Republican Policy Committee has spent some time and effort investigating the cause of rising gasoline prices. Yesterday they published a policy report explaining their findings. The conclusion: rising gasoline prices are largely due to Federal regulations, such as those established by the Clean Air Act. Among their recommendations of things that will help bring down the price of gasoline:

  • “The EPA should have the authority to temporarily suspend clean-fuel requirements…”
  • “Congress should eliminate the Clean Air Act’s oxygenate requirement for reformulated gasoline…”
  • “Congress and the Administration should reform other regulations (known as the New Source Review requirement) under the Clean Air Act that have resulted in the halt of construction of new refinery capacity.”

Huh, who would have imagined that gas prices were so high in recent months simply because of those pernicious environmental regulations?

Actually, let me propose an alternate hypothesis: gas prices have been rising because crude oil prices have been rising. It sounds crazy, I know. Why do I propose such a theory? In part it’s because of graphs like this one, showing crude oil and wholesale gasoline prices since January 2, 1990:


Source: data from the Energy Information Administration, US Dept. of Energy.

I think that I can detect a relationship between gasoline prices and the price of crude oil that would pretty much explain why gas prices are currently so high. But apparently the Senate Republican Policy Committee doesn’t see it that way, and would rather use high gas prices as an excuse to change the Clean Air Act. I guess the only bit about it that surprises me is that they didn’t also find a way to suggest that another tax cut would be the cure for high gas prices.

Kash