It’s understandable for politicians to want energy markets to bend to their will — especially when it comes to gasoline prices. No one likes spending $60, $70 or $80 to fill up their car, SUV or pickup and, well, drivers are voters. The problem is, there’s no simple way to bring down gas prices, and that puts politicians in a quandary. Faced with public outrage, they feel pressured to respond and, with no easy fix at hand, they strain to develop legislative or regulatory “solutions” that in the end may not solve anything. In today’s RBN blog, we discuss the various efforts in the U.S. and overseas to monkey with market mechanisms and rein in the cost of motor fuel.
There’s something special about gasoline. Think about it. When you’re pumping gas into your vehicle at the service station, a product you don’t even see is filling your tank and you’re just standing there, with nothing else to do but watch the neon-bright numbers on the pump increase at what seems like the speed of light. As the tank gets close to full, you wait for the nozzle valve to shut itself off and tell you what today’s damages will be, to the penny. Today, it’s $72.41. Ouch!
Over the past two years, the retail price of regular-grade gasoline (weekly national average; blue line in Figure 1) has increased from $2.12/gal to $3.74/gal — a gain of 76% — and at one point in early June this year that average price topped $5. Midgrade, in turn, went as high as $5.45/gal (yellow line) and premium peaked at $5.76 (green line). And don’t get us started about California, where retail prices for each grade soared past $6/gal five months ago (colored triangles).
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