NCPA - National Center for Policy Analysis

Government Promotes Confusion in Gasoline Markets

May 7, 2002

Economists viewing the petroleum industry scoff at politicians' persistent election-year charges that oil companies are manipulating gasoline prices -- accusations that are debunked time after time.

The real culprits behind volatile gas prices are pollution rules that mandate a variety of gasoline additives and blends directed at particular states across the nation.

  • Because states pile on their own requirements, more than a dozen different types of gasoline are mandated in various parts of the country.
  • Various studies -- including those by the Department of Energy -- find that the nation's fractured gasoline market inhibits competition.
  • The problem is particularly acute in California and the Midwest -- which have seen the worst price spikes in recent years,
  • Despite claims of an industry pricing conspiracy, real inflation-adjusted gasoline prices are lower today than they were 20 years ago -- an average of $1.26 per gallon today versus $1.96 in 1982.

Industry profits have fallen as well.

Experts suggest that the federal government abandon efforts to dictate what goes into gasoline, and switch its attention to what comes out the tailpipe.

That would allow the petroleum and auto industries to figure out how best to comply with emissions goals.

Source: Editorial, "Big Oil Not to Blame for Spikes at the Pump," USA Today, May 7, 2002.

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