Gas Insanity

Posted By Elgin Hushbeck

Einstein famously defined Insanity as doing the same thing over and over and expecting a different result. Based on this definition, we are clearly into insanity when it comes to gas prices. I have been observing this since the 1980s, and I am sure that it goes back before this. Every summer prices go up and people start grumbling about “Big Oil.” If they go up a lot, the politicians get involved, demanding investigations of the oil companies. The summer turns to fall, demand lessens and prices decline, people’s interests turns to other things. Then the results of the investigation come out and the oil companies are cleared. Net result? Nothing happens. Then the next summer comes and the whole thing repeats again, except that most years the problem slowly get worse. Insanity.

In reality there are two main problem here. The first is refineries. In 1982, there were 301 operable refineries in the United States. Currently the number of refineries is only 149, less than half the number. While from 1983 to 2006 average US Total Gasoline Sales by Prime Supplies went from 287 million to 378 million gallons per day. Not to surprisingly this has been accompanied by an increase in utilization rates for the refineries which are now over 90%.

This is why the prices jump whenever there is problem at a refinery. There is simply no slack in the system. So given that while we increased our consumption by 32%, we cut the number of refineries by over 50%, doesn’t it make more sense to at least consider building some new refineries as perhaps a better solution to higher gas prices?

The other major factor is the role of Government. Not only has its policies and regulations contributed the drop in refineries, its taxes also have a major effect not only at the federal level, but at the state level as well. The effect of states and county government can be seen in a nice map from While some of the differences can be accounted for by transportation costs, looking over the differences in prices it is pretty clear that government is the major difference between having to pay $2.75 or $4.08 per gallon.

Perhaps if more people become aware of what is really driving the cost increases, then perhaps we can actually stop the current gas insanity.

May 18th, 2007

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