GASOLINE UPDATE….Here’s a Knight Ridder story about gasoline prices vs. gasoline demand:
Gasoline prices have reached $3 a gallon in some parts of the nation, and crude oil is hovering close to last summer’s record high….[But] U.S. demand for fuel continues to grow. It was up by more than a full percentage point in March and is expected to climb still more when the peak-driving season begins in May.
…. Some states…have banned [a fuel additive called] MTBE….Many refiners, unable to sell in some states and fearing future environmental claims in others, are no longer putting MTBE in their gasoline, which could reduce the volume of the nation’s fuel supply by about 1.6 percent, a large amount in a tight market.
….The American Automobile Association, however, thinks the MTBE issue is already driving up gas prices. “We’re looking for some quantifiable data on that, but it does appear that it is having an effect,” said Montill Williams, a national spokesman for AAA in Washington.
Two comments. First, if 1.6% is a “large amount,” then we are indeed in a very tight market. This is probably due to both refinery capacity issues and fundamental oil supply issues.
Second, gasoline prices have doubled in the past few years and demand has continued to increase. It hasn’t even leveled off, let alone dropped. I’m not opposed to higher gasoline taxes, but anyone who thinks gas taxes are good way to lower gasoline consumption had better be in favor of a whopping big one.