High gas prices have left all of us searching for answers about just why gasoline is so expensive and who is to blame. We can all easily see gasoline prices climb toward, and past, three dollars. We all see, and hear, the clamorous cries of politicians to investigate the high prices, punish those responsible, and generally “do something” about how much people pay for fuel. Most of us feel the bite in our wallet (though not enough to stop us from driving). What most people don’t see are the unintended results from various government decisions, a major reason why prices are so high.
Sure, prices on the sign at the local station went up because Johnny took his suction pole thingy out there and changed the numbers, but that’s not why fuel costs rose. We had to pay more for a gallon of gas because, at the heart of the matter, the amount of gas available for purchase in the United States didn’t keep pace with the amount of gas that Americans wanted to buy.
Restricted gasoline supplies result in higher prices. There are many reasons why the real and practical supply of gasoline in the United States has been restricted and the price has been rising. One of these is that the real supply of gas was seriously strained following the damage caused by hurricane Katrina, and it takes time to put refineries back at full capacity. Another cause of high prices is that worldwide demand for crude oil and gasoline is at an all-time high, thanks to the growing economies of the Far East and America. But that’s not all. We even have our own federal and state governments to thank for these high gas prices.
Even though every politician you’ve ever heard of, and many you haven’t, would like to make sure everyone sees him or her reducing gas prices, there are laws on the books that actually increase the cost of gasoline. I know it sounds crazy, and I’m sure the senators and congressmen who voted for these laws didn’t intend to raise gas prices, but that’s what happened.
What the politicians wanted to do, what they intended to do, was protect the environment. So laws were passed that carefully required that only a certain mixture of fuel, the one best suited for specific environmental conditions, be used in each region of the United States. Activists, concerned with the potential environmental impact of refineries, joined forces with anyone who was concerned about having a refinery built in their city to demand strict regulatory standards and a multitude of requirements for new refineries to ensure safe and environmentally friendly facilities. Congress listened to their requests. Environmentalists lobbied the legislature and told the public about beautiful, untouched, wildernesses or oceans and the devastation caused by oil exploration and drilling, so congress passed laws to protect these pristine wildernesses.
All of us want to protect the environment. We can all enjoy the beauty and majesty of a fresh mountain valley or the wonder of a mother duck swimming on a pond with her ducklings. Sometimes it’s good just to know that untouched regions still exist. Unfortunately the laws meant to protect the environment have had effects that go beyond their intended targets.
I said earlier that laws passed by the government can easily have unintended consequences. Well, the laws that were passed requiring different mixes of fuel in different areas of the United States, or even in different seasons, have had results that the politicians didn’t mean to happen.
Fuel mixture laws are intended to cut down on smog in heavily populated areas and reduce the amount of carbon monoxide pollution from autos. The areas of the country that currently require specially formulated fuels each have their own requirements that must be at least as strict as the federal regulations. To make matters worse, some of these requirements apply through the whole year and others do not.
The problem with these laws is that in a situation where there aren’t ample supplies of each fuel mixture, when the mix of fuel for one area runs short – say, because a hurricane damaged the refinery making that particular mix, or demand increases during the summer – it is nearly impossible to shift fuel from other areas. Further complicating matters is the yearly switch from summer to winter fuels and back again, which leads to temporary shortages when it comes time to switch fuel mixtures. This is exactly what happened briefly up and down the East Coast earlier this year. The result in the affected area is prices at the pump that rise rapidly.
Clean air is good, but protecting that clean air can have consequences we don’t want. Laws that regulate refineries and refinery construction have made the process very lengthy and very expensive in this country. In fact, building a new refinery has become so difficult in the United States that none have been built here in over thirty years.
Gasoline production around the world has expanded, but this is mostly due to new refineries that have been built in other nations. American demand for gasoline has continued to climb during this thirty years and, though refineries in the United States have expanded production and become more efficient, we have had to run the refineries full tilt while still importing processed gasoline from foreign nations. This becomes a problem as growing economies around the world, including ours, continue to demand more fuel, and are willing to pay for it. If a refinery can get comparable prices from different customers, the refinery would rather sell where they don’t have to pay costs to ship overseas. The result is that we have to pay higher prices to offset transportation costs and get the same fuel.
Like the laws to protect the air by requiring fuel mixtures and the laws to ensure safe refineries, the laws designed to protect the pristine wildernesses seem to have worked. The wildernesses are protected, protected so well that even efforts to reduce America’s sensitivity to worldwide oil demand and supply changes by drilling in very small areas are refused. So the oil sits untouched in Alaska, off our coasts, and in the Gulf of Mexico. Oil that, if extracted, could increase American oil production enough to soften the negative effect that the uncertainties in Iran and Brazil have on our gas prices.
So we see how, with the best of intentions, government can cause higher gas prices when all they really wanted to do was protect the environment. Actually, it’s not just gas prices. An astonishing amount of things done by government have an impact or consequence beyond what they meant to happen, and unintended results are caused whenever government tries to fix anything by using laws. In our complex economy everything is interrelated. When government changes the laws to address one issue, it ends up affecting some other, different, issue. This is what happened with the environment and gas prices. Sometimes it can take years before we start to see the full effect of a new law, but sooner or later its true colors will show.
The government certainly doesn’t mean to drive up the price of oil and gasoline in the United States, but neither are they able to fully see the results of their legislation. These laws were only intended to protect the environment in some way. Yet each of them has, because of consequences the government never intended to happen, helped make it more expensive to fill my tank at the gas station.
