NCPA - National Center for Policy Analysis

Gasoline Price Increases

May 2, 1996

Late last week, the Department of Energy released a study which confirmed that soaring gasoline prices just two months ago were a result of market forces, not some oil industry cabal. Prices increased on average 20 cents a gallon between mid-February and mid-May.

Here are some of the findings:

  • Gas prices shot up because crude oil prices increased due to tight inventories.
  • The reason gas prices escalated even higher in California than in other states was that state's tough clean-air laws which forced motorists to use a type of gasoline not sold anywhere else.
  • But higher prices have brought more oil to market and much of the recent rise will be reversed during the summer.
  • Prices have already dropped about 3 cents a gallon, and should go down another 10 cents over the next three months.

Experts say that President Clinton's panicked decision to sell 12 million barrels of oil from the nation's Strategic Petroleum Reserve cost taxpayers nearly $140 million. In addition to $40 million in costs for storage, the U. S. lost by selling oil it had purchased at $27 a barrel for $21 a barrel.

When pressed, an Energy Department official admitted that there was no way the department could prove that the move had any effect one way or the other on gasoline prices.

Source: Perspective, "Gas Prices and Politics," Investor's Business Daily, June 17, 1996.


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