The WSJ has an article on the front page discussing this very issue today.
The first reason is that there is a limited amount of refining capability in
the US, for pretty much the same reason there is limited electrical
capability in California.  These refineries have been running full tilt to
keep up with the demand for heating oil and have had no down time for
maintenance or repairs.  The second reason has to do with a federally
mandated additive called MTBE which comes from natural gas.  With the
shortage of natural gas comes the higher price of the additive not really
related to the price of oil.  The third reason is that summer gasoline has
to be lower in emissions than winter gasoline.  Up until this year, the
refineries were allowed to mix the winter and summer gas until the winter
gas was flushed out.  This year no mixing is allowed and the tanks have to
be drained completely before storing the summer gas.  So the crude oil is
sitting there just waiting for the maintenance to continue and the tanks to
empty creating a shortage.  Enter higher prices and higher profits.

Ray Shahan asks after Tom Emerson:
>The thing that really *&^%$ me off is that gas is going up in price, and so
>are the petroleum company profits.  If the gas price increase is due to a
>shortage of gas, then why are profits so high?

Basic Economics:  A Citizen's Guide to the Economy by Thomas Sowell
(http://www.amazon.com/exec/obidos/ASIN/046508138X/qid=988049722/sr=1-1/ref=
sc_b_2/107-7546322-1219721)

Briefly, in a price-controlled economy, which we try to have some/most of
the time, when there is a shortage of a resource, higher prices perform two
functions.

1.)  It keeps a few from hoarding the scarce resource.  The natural, and
emotional, reaction to higher prices is that someone is trying to take
advantage of someone else, i.e. gouge them.  If the prices were kept low,
some could easily hoard the resource and then REALLY screw you.  Higher
prices are making consumers buy less gas already, much like Tom's original
post suggests we do.  BTW, I have seen Honda's new hybrid on the road here
in Michigan.  Not really a family car, but not bad looking compared to other
hybrids.

2.)  The high profits that come from the higher prices encourage others to
produce more of that scarce resource.  If the profits get really high, then
others will want to get into the refining business, which would raise
supplies and eventually lower prices.  Except in this case, the barriers to
adding refining capability in the States are very high.  We will have to
count on other countries for this capability.  (More and more, it's looking
like Mexico.)  If prices and profits were not allowed to rise, we would just
run out, which the folks in California can attest.  In this case, it would
not be for anything OPEC has done, but because of the regulatory choices we
have made.

So, if you want clean air, like I do, then quit your bitching and pay up.
;-)

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