Gas Prices Shouldn't Surprise Us.

Charles knows why:

1. Demand is up. That shouldn't be a surprise with all the new industries and new cars in garages all over the world.

China has come from nowhere to pass Japan as the number No. 2 oil consumer in the world. China and India -- between them home to eight times the U.S. population -- are industrializing and gobbling huge amounts of energy.

American demand is up because we've lived in a fool's paradise since the mid-1980s. Until then, beginning with the oil shocks in 1973, Americans had changed appliances and cars and habits and achieved astonishing energy conservation. Energy use per dollar of GDP was cut by 30 percent in little over a decade. Oil prices collapsed to about $10 a barrel.

Nothing has changed (since 1996). Except that since then, U.S. crude oil production has dropped an additional 12.3 percent.

2. Supply is down. This is more troubling.

Start with supply disruptions in Nigeria, decreased production in Iraq and the continuing loss of 5 percent of our national refining capacity because of Katrina and Rita damage. Add to that the mischief of idiotic new regulations. Last year's energy bill mandates arbitrary increases in blended ethanol use that so exceed current ethanol production that it is causing gasoline shortages and therefore huge price spikes.

Why don't we import the missing ethanol? Brazil makes a ton of it and very cheaply. Answer: The Iowa caucuses. Iowa grows corn and chooses presidents. So we have a ridiculously high 54-cent ethanol tariff and ethanol shortages.
Other regulation requires specific ("boutique'') gasoline blends for different cities depending on their air quality. Nice idea. But it introduces debilitating rigidities into the gasoline supply system. If Los Angeles runs short, you cannot just move supply in from Denver. You get shortages and more price spikes.

And don't get me started on the missing supply of might-have-been American crude. Arctic and Outer Continental Shelf oil that the politicians kill year after year would have provided us by now with a critical and totally secure supply cushion in times of tight markets.

In March 2000, the price of gas hit $1.80. Scandalized congressional Republicans shamelessly pushed for repeal of Bill Clinton's whopping 4.3-cent gas tax increase. Now that the president is a Republican, what do you think Senate Democrats are proposing? A 60-day suspension of the federal gas tax. It would cost $6 billion and counteract the only good thing that comes with high gas prices -- the incentive to conserve.

George Shultz once said, "Nothing ever gets settled in this town." But even Shultz, who has seen everything, must marvel at the perfect regularity, the utter predictability, of the bottomless cynicism of Washington in the grip of gasoline fever.

There's something wrong with this picture. How can be shown up by...Brazil? Don't we have more technology, a more educated population and "Yankee Ingenuity?"