U.S. biofuel push seen lifting gasoline prices

[RedEarth]

Source: International Herald Tribune

NEW YORK: Gasoline prices are spiking again - to a record, adjusted for inflation, of more than $3 a gallon in most parts of the United States and close to $4 a gallon in others.

While Europeans are long used to far higher gasoline prices because of taxes, the U.S. price spike appears to be prompted by short-term market forces. Many oil companies are doing maintenance work on refineries; new U.S. rules make fuels cleaner but costlier; and a string of delays, fires and accidents have reduced supplies just when drivers are starting to hit the road for summer vacations.

Many experts predict prices will keep rising in the short run, but then soften later in the summer as demand trails off.

But some oil executives are now warning the current shortages could become a long-term problem, leading to stubbornly higher prices at the pump. And they point to a surprising culprit: uncertainty created by the government's push to increase the supply of biofuels like ethanol in coming years.

In his State of the Union address in January, President George W. Bush called for a sharp increase in the use of biofuels, along with some improvement in automobile fuel efficiency to reduce America's use of gasoline by 20 percent within 10 years. The Congress is considering legislation calling for a nearly fivefold increase in the use of ethanol. That has led many oil companies to reconsider or scale back their plans for constructing new refinery capacity.



Read more: http://www.iht.com/articles/2007/05/23/business/refinery.php

[havocmom]

1. Law of Supply and Demand = $ up when demand up / $ up if demand goes down

Capitalism run amok.

[krkaufman]

2. Exactly!! Somehow the price goes higher, either way...! Go figure.

[ixion]

3. it's not capitalism in any sense... it is cronyism and corporatism, which are closer to communism,

ironically.

Enron ran the proof-of-concept by gaming the utility companies in CA. Now they're doing it on a national scale. If it were really supply and demand, oil company profits would have been marginal, rather than astronomical.

That's my take on it anyway...

[havocmom]

4. Yes, I know; thus - 'runs amok'

Actually, doesn't seem like there is capitalism left anywhere on the planet. It all ran amok with boundless greed and turned into economic terrorism.

[olddad56]

5. Bio fuel is going to push the price of corndogs through the roof.