Understanding gas prices is not as simple as the general assumption that somewhere in corporate America , a “Wizzard of Oz” type increases and decreases prices as he wishes. There are other factors that are contributing to this latest price increase.
MTBE
“Methyl tertiary butyl ether — an octane booster and oxygenate used for gasoline blending (more on MTBE on Wikipedia).
Studies have shown that the usage of this booster is very harmful to the environment which explains the many lawsuits against those that use it. Here is an excerpt of a USA Today article that further explains:
Gasoline prices will be unusually high and shortages might occur this summer, because the U.S. ethanol industry can’t keep up with the demand for fuel-grade alcohol to mix with gasoline, the head of the U.S. Energy Information Administration told a Senate committee Wednesday.
Merely “short-term challenges,” countered Bob Dinneen, president of the Renewable Fuels Association, the ethanol trade group. Whatever can’t be produced here can be imported, he said.
But imported ethanol, mostly from Brazil, carries a 54-cents-per-gallon tariff that would boost fuel prices even more, unless it were waived.ÂÂ
Refiners have used MTBE for years and now are discontinuing it because MTBE can taint water supplies and Congress has refused to protect them from MTBE lawsuits. Ethanol is the only ready substitute.
Dinneen pointed out that 33 ethanol plants are under construction and that some of the 97 others already producing are being expanded.
But EIA, in a report last month warning of shortages, said that “new (ethanol) facilities will not start soon enough to meet 2006 demand.” That, EIA head Guy Caruso told the committee, “could cause temporary supply dislocations and may cause price volatility.”
Ethanol mainly is made in the Midwest. But demand should be heaviest in the Northeast and Texas because of special clean-air fuel requirements there. Shipping alcohol costs more and takes longer because ethanol attaches to any moisture present and could contaminate petroleum pipelines  the cheap, fast way to ship.” (more…)
Here is a graphic that gives you and idea of how what you pay at the pump is divided amongst suppliers.
I found this image on a website that further explains why gas prices fluctuate (click here for the source).
I know that this information does not have as much “sex-appeal” as pointing to white oil execs as the blame for potential $4.00/gallon gas, but does present a very clear and cohesive explanation. Sorry, but fuel here in the US would not have gone up if the sole reason for going to Iraq was to fill our cars with cheap gas.
