Gas Prices

[Max Sawicky]

Our green guy says the main problem is in the
Midwest, and that is due to a busted pipeline
in Texas that has backed up supply.  The EPA
regs some people are screaming about have a
small effect on cost (less than ten cents a
gallon).  The cartel is squeezing a bit too,
but that is not a regional phenom.

mbs

I am curios if any LBOers have a cogent analysis of the gas price situation.
I have heard more theories and speculation than analysis.

My own opinion is of domestic nature - increased production of larger
vehicles (because they are more profitable) causes an increase in aggregate
demand (and dependence) on gas, thus pushing up the price.  When coupled
with poor public transportation, you will give you that pesky price
increase.

Gas, inflation adjusted, is cheaper than it was in 1969 (when it was $0.35
per gallon).  Plus, the price we pay for gas doesn't reflect the social cost
of its use - the negative externalities.  So some might argue that gas is
actually underpriced.

But there must be more at play ...OPEC, collusion/price fixing, the new EPA
regulations in the Midwest.  No?

Thanks,
Aaron