We're into one of the major "driving" holidays in the US, the traditional unofficial start of summer. And that's not to mention a day that a lot of Americans need to travel, because officially, it's Memorial Day, a day of special annual funeral services for our war-veteran dead, and this year (as with the last four Memorial Days), there are a lot of families with new reasons to gather from all over the country, with especial urgency to gather, at military cemetaries. It's also (for those reasons) a traditional weekend for gasoline prices to fluctuate upwards, because of the rising demand from the "summer driving season" and the need for refineries and resellers to swap out their stock of winter-grade gasoline for (also more expensive to make) lower-smog summer-grade gasoline. So even if oil weren't trading about the previously unthinkable price of $135 a barrel (up from $45 a barrel 4 years ago, from $15 a barrel during the Reagan administration) this would be a weekend when gas prices would be going up. Just not as high as they are, breaking $4/gallon for regular unleaded in places scattered all over the country, and averaging only a little less than that. And not a few voters have been saying for weeks now that their vote in November will be determined almost entirely by their opinion of which candidate will do the most to lower the price of gasoline. (Europeans who are going to give us hell over that: save it. Nobody here needs or wants to hear it. No, really, don't bother opening your mouth.)
Vote for Barack Obama for President in November.
First, let me start you off with a fairly good primer, compiled by two Associated Press business reporters for the driving weekend: John Porretto and John Wilen, "AP Impact: What Makes Up the Price of Gas?," Associated Press, 5/24/08. It'll walk you through where the money is going, and why, step by step, penny by penny. Short answer: oil prices are vulnerable to speculation, like anything traded on a commodities market. Demand is up and supply is steady, but not enough to explain the hike. The price is taking an especial hammering when measured in US dollars, because the US dollar is dropping in value like a rock against almost every other currency in the world. There's also a risk premium, that is to say, prices go up when oil dealers get nervous about whether or not there'll be a supply disruption next month, a "hedge" against next month there being, say, civil war in Nigeria, or a US bombing of Iran, or Iraq's Sunni Arabs returning to sabotage of Iraqi oil facilities, or chaos in Russia, or civil war or coup d'etat in Venezuela, or any problem in any country that could lead to it temporarily dropping out of the oil-selling business. Then come the various taxes, but they haven't gone up in the last four years; the cost of refining, which has gone down over the last four years; and the profits to the gas stations, which have basically vanished over the last four years, which is why they're all remaking themselves as grocery stores and fast-food places that just happen to sell gasoline (at a loss). So no, really, the price hike is almost entirely due to the falling US dollar and the oil traders' increasing fears that US foreign policy is going to wreck yet another oil producing country.
This article doesn't say, but I've heard the "risk premium" estimated in other articles about oil trading, lately, as $25 to $30 a barrel just from the Iraq occupation alone. Furthermore, history strongly suggests that the Iraq War is also the reason for the other major factor, the reason why the US dollar is going down the toilet. Or rather, not the war itself, nor even its ruinous cost, but something more fundamental than that: the way we're (not) paying for it. When the US goes to war, there are only two ways to pay for it. All Americans, especially the wealthy but really no, all Americans, can make shared sacrifices, accepting rationing, accepting higher taxes, to pay the cost of the war. Or we can just print the money. In this case, we're just printing the money, specifically, we're issuing another almost 20% of the budgeted debt in government bonds (debt) for off-budget "war supplemental" funding, and unlike in some previous wars, we're not selling War Bonds at deeply discounted rates to the public out of patriotism, we're selling them at sharply rising rates on the open market, especially to China and Saudi Arabia. And whenever the US runs the printing presses to pay for a major war, the currency plummets in value; there's a reason why the phrase "not worth a Continental Dollar" was slang for "worthless, not worth the paper it's printed on" for a hundred years after the Revolutionary War. And that's why this graph (taken from GasBuddy.com via stlouisgasprices.com) shows that the steep rise in prices corresponds exactly to the war in Iraq, and not just to the war in Iraq (or else the price would have jumped at the beginning and plateaued) but, more importantly, to our total accumulated war debt:
So if you don't want to see runaway inflation get worse and runaway unemployment set in with it, like we had the last time, back in the 1970s when two presidents in a row (then one Democrat, Johnson, and one Republican, Nixon) both decided to fund a major land war in Asia without raising taxes or selling discounted War Bonds to the American public, your first priority should be to elect the person you trust the most to end the war in Iraq, to not just stop the pointless dying and the war crimes and the war profiteering and the endless series of blows to our reputation and the reputation of secular democratic free market capitalism and the easy recruiting bonanza for Islamists but to also stop the endless and unaffordable money hemorrhage, as fast as possible. And if you're at all honest with yourself, you know that that man is Barack Obama.