As gas prices top $4/gallon in an election year, Americans are fed up with empty promises and cheap gimmicks. Who in their right mind buys Newt Gingrich’s claim that he can lower gas prices to $2.50/gallon?

So, who or what is to blame for high gasoline prices?

The Big Oil spin machine and the Republicans who received 88% of Big Oil campaign contributions would have you believe it’s the President’s conservation policies which aim to balance responsible energy development and the protection of our Great Outdoors.

The truth is that energy development and conservation is not a zero sum game. Under the Obama Administration, domestic oil drilling hit a record high, American oil production hit an eight-year high, domestic demand is at its lowest point in 17 years, and America stands as a net exporter of petroleum products.

The simplistic view of “drill here, drill now” has no credibility as a means to bring down the price of a gallon of gas. In fact, the Associated Press just reported that increased oil drilling has never brought down gas prices.

When I studied Economics, one of the first things they taught was the Law of Supply and Demand and how it should affect price in a free market. This year, the price at the pump seemingly defies that law. Demand for oil and gas in America is down and production is up. But that hasn’t prevented prices from surging, and oil industry profits surging right along with them.

To be clear, supply and demand is one factor at play – but on a global level. The economic progress of China and India, as well as the swelling appetite for oil that comes with that growth, adds to an increase in oil prices. Clearly supply and demand are not the whole story though.

As one expert at Oppenheimer & Co recently noted, “Speculation is now part of the DNA of oil prices.”

That sentiment is echoed by some unlikely sources. ExxonMobil CEO Rex Tillerson recently stated that oil speculation and uncertainty over Iran are driving up the current price at the pump. Citing Goldman Sachs, Forbes reported this past February that oil speculation was adding $0.56 to the price at the pump.

Something else that seems fishy is that while global demand is going up and gas prices surging, Big Oil’s refineries in the United States are cutting back.

So while Americans struggle to pay for the cost of these high energy prices, the oil and gas industry made nearly $137 billion in profits last year. Make no mistake. Oil companies don’t want lower gas prices because it means less profit.

So what is there to do?

President Obama is correct when he says there is no “quick fix” to gas prices. Congress needs to end taxpayer handouts to big oil and reinvest those funds in American energy innovation and clean energy solutions. We need to make our cars and trucks more fuel efficient, so American families can cut energy costs and travel farther on less oil. Congress and the Commodity Futures Trading Commission should crack down on Wall Street speculators to stop their gambling from artificially inflating the price at the pump.

We need an all of the above energy strategy that goes beyond oil. Unless we truly end our dependence on oil, foreign or domestic, we will continue to be vulnerable to global events and market manipulation by Big Oil and their friends on Wall Street.

The phenomenon has become as reliable an indicator of spring as budding trees: gas prices go up just before peak summer driving season begins. Then, just as reliably, by Labor Day they’ve fallen again. According to 2012 Republican presidential candidates, the President of the United States has the ability to dictate these numbers at the pump. If only he had such power. But the reality is, as long as America is dependent on fossil fuels like oil, we’re at the mercy of those factors that influence the global market: Israel’s threatened war with Iran, the reduction in output from certain foreign producers, Wall Street speculators, Middle Eastern countries dominated by political unrest, and oil companies out to make a profit.

If the federal government is serious about redirecting this country to a more sustainable energy future, it should immediately eliminate the subsidies paid out to Big Oil–up to $4 billion each year. Instead of fattening the wallets of Big Oil CEOs, our government should be taking that money and investing it in clean energy solutions and higher fuel efficiency vehicles that will break our country’s dependence on foreign energy and dirty fossil fuels. Some in Congress are already taking steps to do just this. Sen. Robert Menendez (D-N.J.) recently introduced a measure that would end several tax benefits for major oil companies while extending a series of renewable energy tax breaks that have recently expired or are soon scheduled to do so. A vote on this forward-looking bill is expected in the coming days.

Passing legislation to invest in clean energy solutions will not be easy. The 112^th Congress has an ugly record of voting in favor of Big Oil profits over the public interest, slipping measures into draft legislation like the Transportation Bill that have oil executives licking their chops; measures that seek to open places like the Arctic National Wildlife Refuge or waters off Virginia’s coast to drilling. These efforts to sell off some of our most cherished public lands will do nothing to solve high gas prices this year, next year or for many years to follow, but they are great for oil profits and for the elected officials funded by Big Oil.

Instead of sacrificing America’s pristine lands and waters to profiteering oil companies, our leaders should be investing in long-term, clean energy and energy efficiency solutions that will end our dependence on dirty fossil fuels and break us from the cycle of rising gas prices forever. Building a renewable energy portfolio will take some time, but by eliminating Big Oil’s tax break giveaway and investing that money in clean energy solutions now, Congress can put us on the track to get there. Without a realistic plan to end our country’s addiction to oil, the Republican leadership’s promise to lower gas prices rings as hollow as an empty gas tank.

The other posts here have made a number of interesting points that I will try to build upon. I think it is less important where the “blame lies” than what the US can do moving forward.Currently, 75-80% of the cost of gasoline is determined by the price of petroleum and thus I will focus my attention there. The other 20-25% (refining and distribution) is important and perhaps more directly amenable to US policy influence, but I will focus on the elephant in the room.

It is important to distinguish between price levels and volatility. Petroleum is a global commodity, whose price, over the last 60 years has hovered in the $20-40 per barrel range in real (2010) dollars, with the exceptions being the price spike in the mid-late 1970s (due primarily to the Arab oil embargo and subsequent unrest in the Middle East) and the spike-lag-spike experienced around midway through the last decade through today. The level and volatility both have economic effects, though they are of a different nature. The price level affects household budgeting and long-run investment decisions; volatility causes uncertainty and liquidity problems.

As for US policy, the short run price is not easily manipulated by a US President or Congress, given the other fundamentals that influence it such as OPEC supply decisions, internal tensions in the Middle East and seasonal shocks. That point has been made abundantly clear in other posts here. Policy leverage is increased when a longer term view is taken and that is where long-run fundamentals come into play. US demand is slightly declining and supply is slightly increasing, but the net US balance means that it has a much larger impact on the petroleum price through the demand side (23 percent of world total consumption) than the supply side (9 percent of world production). Therefore US policy influence on lowering the world petroleum price is either through policies that reduce demand (CAFÉ standards , alternative fuels, transportation infrastructure, etc…), increase supply (drilling more), or a combination of the two.

Given the numbers, there is much more room for the US to influence long run oil prices on the demand side with efficiency standards and alternative fuel discoveries than on the supply side, absent a major discovery of resources or technology to access them. The latter cannot be completely dismissed, however, as the current expansion in natural gas supply via recent advances in hydraulic fracturing have rapidly transformed the supply-demand balance there. So a dual approach demand-supply approach, in principle, can both work toward alleviating the scarcity and price problem.

If this were only about tapping as much energy at the lowest price possible, then the more we discover, the lower the price and the more we can use are all socially desirable outcomes. But the end goal is not about producing as much energy as possible; rather it is about producing as much economic and social well-being as possible. And this is where the environmental consequences of energy production and use enter into the conversation. Yes, energy exploration generates employment, high-paying and regionally important. But energy also generates a whole suite of environmental costs that are not fully captured in the price system. We cannot say a priori that the employment effects are more important than the environmental damages in economic terms, but we do need policies that properly price the externalities, such as carbon emissions, so that they can be adequately factored into the economic calculus. Absent, comprehensive climate legislation to price carbon, it is left to fragmented environmental and energy policies to move us forward and determine how we will meet the economic and environmental goals of tomorrow. In light of this reality, prudent investment on the demand side to reduce both the out-of-pocket expenditures and the negative externalities of energy production and use seems a wise path to follow and should be a featured element of the now fabled “all of the above” energy policy.

High oil prices are the direct and inexorable result of the utter failure of successive American governments of both parties to take long term steps to reduce the market power of the oil cartel since 1972. So the unwillingness of the American political system to confront the power of international oil is the culprit. Everything else is short-term noise.

Oil importers can only reduce the ability of the oil cartel to increase their prices by reducing demand. There is indeed a lot of untapped oil in the world – but most of it costs too much, or is controlled by oil cartels. Pumping expensive oil cannot produce cheap gasoline. The US currently produces about 10 mbd a day. New finds in places like the Bakken are increasing that. But even a dramatic 25% increase in low-cost US oil production would make up for only two or three years of growth in global demand. And US reserves like the Utah oil shales and the Arctic Wildlife Refuge will not be profitable unless the price of oil is well north of $60/b. Neither will Canada’s tar-sands, or some of the ultra-deep drilling projects being explored. Most of the new oil reserves we hear about are not available below $60/b.

Currently, world oil markets will produce about 85 mbd a day for a reasonable, $60/b price. But just increase demand from 85mbd to 90, and the price soars over $100 – because at 90 mbd the market starts demanding very high cost oil: remote Arctic, ultra-deep off-shore and tar sands.

That’s bad news if we trust oil markets to solve the problems. But it’s good news if oil importers are willing to get organized and reduce their demand for oil – by even a moderate amount.

How can we keep demand for oil down without strangling economic growth? We have to use fuels more efficiently; we must increase our supply of alternative fuels not derived from oil. There are ample options: electric vehicles, shifting traffic from trucks to rail, more efficient vehicles and planes, better biofuels, domestic natural gas in various forms – CNG, LNG, methanol.

Every one of these options, at scale, is cheaper than $100 oil. (CNG right now costs the equivalent of $1.50/gallon.) And we don’t need vast quantities. Replacing just 6% of global oil consumption with nega-gallons (efficiency) and alternative fuels would dramatically cut world oil prices. Going forward, we’d need more each year – probably a couple of million barrels a day. As vehicle fleets turn over, electrifications scales, and advanced biofuels mature, that gets easier and easier. But alternatives are limited by the lack of supply chains and distribution, and the fact that Detroit, for example, has never produced vehicles in volume for fuels other than petroleum.

But for those options to penetrate the market sufficiently to break the power of the oil cartel to raise prices, they need to be protected from the historic willingness of OPEC to let the price of oil periodically collapse. This volatility dries up investments in oil substitutes. Oil substitutes, of whatever sort, don’t need higher oil prices -- $60-80 is plenty high – but they need protection against artificially low oil prices produced by OPEC flooding the market by pumping during recessions as it did in 2008.

Investors need to know that if they invest in electric vehicles or natural gas fuel supply chains that they will have a market – and thus far OPEC has been allowed to strangle that market every time it starts to develop. There are three ways to guarantee markets for oil substitutes, including efficiency. Mandate demand for efficiency and alternative fuels, with various kinds of regulations. Tax oil, as the Europeans do. Or limit imports, as the President of the United States enjoys the power to do. There are advantages and disadvantages to all three approaches. All are better than paying hundreds of billions of dollars a year to import $100 oil. And unless we embrace one or ideally several of them, we are quite simply saying that actually, we don’t mind expensive gasoline.

Who--or what--is to blame for high gasoline prices?

The premise that we have high gasoline prices is wrong. If we look worldwide we have some of the lowest gasoline prices of an industrialized and developed country. The price of gasoline in Istanbul is close to $10 per gallon. The Price for gasoline in Oslo is well over $9 per gallon. The prices for gasoline in Amsterdam, London, Rome, Monte Carlo, Copenhagen, Athens, Stockholm, and Brussels are all over $8 per gallon. The price of gasoline in Esmara, Eritrea is over $9.50 per gallon.

The price of gasoline at the stations near to where I live is around $4 per gallon. These are about the prices I faced in April 2011 during the depths of the Libya crisis when such questions were asked once again. Every time there is a rise in the price of gasoline the media goes a bit off the wire without much real analysis or historical memory. To get a better view of the recent history of gasoline prices go to: http://www.eia.gov/petroleum/gasdiesel/. To get a good sense of what goes into the price of gasoline see: http://www.eia.gov/energyexplained/index.cfm?page=gasoline_factors_affecting_prices. It is interesting to note that taxes are only about 12% of the price of gasoline in the US on average. In places like Turkey and through much of the EU taxes are 40-70 percent of the prices of gasoline.

Gas prices also are different across regions in the US given supply and demand conditions, special state and local taxes, and sometimes due to the local regulations that require boutique fuels to be produced in refineries for environmental or other reasons. See: http://www.eia.gov/energyexplained/index.cfm?page=gasoline_regional

To get a good view of the longer term view of historical gas prices go to: http://www.eia.gov/energyexplained/index.cfm?page=gasoline_prices. This link also has a chart of the real prices of gasoline after inflation is taken away. This is a far more important set of data than simple nominal prices. One could also go to: http://www.eia.gov/forecasts/steo/realprices/. If you tab back to 1980 you will see that the prices we are paying now for gasoline are not that much different than what they were during the oil price shocks of 1979-1980. Although, the prices are now higher, on average, than they were at that time.

One could also look at: http://www.eia.gov/energyexplained/index.cfm?page=gasoline_fluctuations. This link also discusses how gasoline prices are connected with oil prices.

In this country the price of the crude that goes into the making of gasoline at refineries is the largest factor in the price of gasoline. If the costs of refining each gallon, the absolute taxes charged, and the marketing and other charges stay about the same then the most important driver for an increase in the price of gasoline will be the crude oil feedstock that goes into the refining.

This link will send you to some information on the real prices of crude oil: http://www.eia.gov/forecasts/steo/realprices/. In real and nominal terms we are paying more for a barrel of crude oil now than during the price shocks of 1979-80. Those with some historical memory remember those price shocks were mostly due to the loss of output onto the world markets of Iranian crude due to the revolution in that country.

It seems Iran keeps coming back into our gas tanks. This time, a significant part of the increase in the price of oil, on average, can be attributed to a Gulf risk premium that is in large part due to the potential problems that could arise from a conflict with Iran. There are also shocks to the world oil markets due to the sanctions placed on Iranian oil and Iran’s unilateral actions to “sanction” some EU countries by not selling oil to them – at least directly.

There is a lot of movement of oil shipments from where they normally went to some other places or even some into storage, but it is hard to tell how much is going into storage at the moment. Some Asian countries are voluntarily cutting back on their demand for Iranian crude. The Saudis and others are trying to fill in those gaps.

Given the cut backs in Iranian crude demand one would expect that there would be downward pressure on oil prices. However, Iranian output is also down. We will see if the Iranians go into panic mode at some time and try to sell off their oil at cut-rate prices to try to break the efforts to stall their sales of oil. There are also barter arrangements of wheat, rice and other agricultural items for oil that Iran is trying to set up with Pakistan, India, Russia, and more. We shall see how this works out. Cutting the Iranians out of the SWIFT network has really put them on the ropes when it comes to food, oil and other trade. Sanctioning their Central Bank and other financial institutions has tended to make selling Iranian oil more difficult. This would bring an upward pressure on the price of oil.

The problems between South Sudan and North Sudan are also part of the cause of the increase in the price of crude oil and hence gasoline in many parts of the world—not just here. South Sudan and North Sudan have been in very contentious negotiations on the proper pricing of transit fees for the oil going from South Sudan to Port Sudan in the North. Recently South Sudan decided to shut down the pipeline that went to the north. This cut off about 220,000 barrels of day from the world oil markets. Most of this went to China, India, Malaysia and Japan, but oil markets are world markets and other markets needed to respond to this loss of oil.

The Sudan situation is not a large part of the explanation of the increasing price of oil, but it is not insignificant enough to dismiss. George Clooney aside, most oil experts think Sudan is part of the picture, but not the most important part of the picture. Mr. Clooney’s issues about the safety, security and quality of life for Sudanese are spot on, however. The situation is dreadful. This situation of attacks along the borders where most of the oil is found in both the north and the south could add into an all-out war in the country. This may lead into the loss of about 50,000-120,000 barrels of oil from the northern fields. When the country split about 75 percent of the known oil reserves went to the south. The south needs the pipeline to the north to sell its oil. Both Sudans need the oil revenues to survive. They are both heavily reliant on oil for their government revenues and for, frankly, their economic and political stability. We could even see the Arab Spring hit North Sudan due to the cut backs in oil revenues from the transit fees paid by the south.

Then we have the brewing instabilities in Nigeria from Boko Harem and the MEND coming back into play. This could get much worse if their new Petroleum Industry Bill, which has been wallowing in their parliament since 2008 is not passed. Then we have the potential instability in Venezuela from the severe illness of Chavez.

Then we have continuously increasing demands for oil from China, India, parts of Latin America, Turkey, and even from the Middle East itself. The demand for oil by the Saudis and others is growing quite quickly.

If we have a quickly growing EU things would be much worse for the price of oil. However, the EU is pretty much stagnant on average.

Oil production in Libya is on the comeback. This is good news. Algeria might be seeing increased instability. This is not good news. Iraq seems to be getting worse. This is bad news.

There are threats against the Straits of Hormuz, where about 16-17 mbd of oil, out of a world total of 87 mbd, goes through. This is bad news. Yemen is heading south and it has one of the main choke points for cargo trade and oil trade beside it: the Bab Al Mandab. This is bad news.

The XL pipeline was stopped. This is bad news for investment in some oil facilities. The Seagate pipeline is being reversed to bring oil from the MidWest to Texas for refining. This is good news. The southern part of the XL pipeline will be built. This is good news.

Shale oil and oil shale production is way on the increase in North Dakota, Texas and more places. Offshore oil exploration and production could be increased. These are good news items.

Auto companies are starting to focus on more efficient cars. The high gasoline prices may prompt more people to buy more fuel efficient cars. There could be less of a demand for gasoline over the long run per person if cars and trucks increase their fuel efficiency greatly.

But the drill and drill some more aspect of getting the price of oil down is a long term solution. Moving to more efficient cars is a long term solution. Solving the problems with Iran, in the Arab Spring, in Nigeria, in Venezuela, and more are also likely to be long term “solutions” of “muddling through management”.

One short term solution is being handed to us by the Saudis. They are sending piles of oil in our direction to temper the markets. They are expanding the production capacity of their Motiva refinery in Texas. This could take some time, but could take some of the pressure off of the refined products markets in the future. Some refineries have closed in the Northeast. This could have some interesting effects on the markets in the medium to long runs: http://www.eia.gov/analysis/petroleum/nerefining/update/.

So, by now, you are likely thinking: “Wow, this is really complicated!” Yes, it is and it is even more complicated as I explain in some of my public talks.

And what can be done to lower the prices?

In the short run not much. If the Iranian situation explodes, let’s say, if the Israelis attack Iran, then all bets are off. Is anyone up for $250-500 a barrel depending on the scenario? The worst would involve serious damage to oil facilities and ports in the Gulf, such as Kharg Island, Ab Qaiq, ABOT, KABOT, Ras Tanura, Jubail, Ras Laffan, major pipelines in Saudi Arabia and more. The economic damage to the area from an all-out war could also spur on the Arab Spring in Saudi Arabia, Iraq could get much worse, and so much more could result that it is hard to think about it.

We will be at the whim and odd wisdom of oil markets for some time. This will be the case even if we become net exporters of oil in the next 20-25 years or so as some have said might happen. Oil markets are world markets. What happens in far away places can affect the price of gasoline in Peoria or Manhattan just the same.

We could go the route of getting rid of the gas taxes, but that would be counterproductive for road building and also for moving from oil to other transport fuels.

One of the presidential candidates said he would bring $2.50 gas back. He did not explain how. Here are some ways: 1. subsidize gas to the US consumer by about $200 billion. (Not good for the budget?) 2. Have driving moratoriums in major cities like New York, Los Angeles, Miami, etc. (Hmmmm.. a lot of unhappy drivers?) 3. Resolve the situation with Iran. (Not easily done and in the long run. This same candidate wants to bomb them. See above about some of the potential effects of bombing them.) 4. Drill and drill some more. (This is a medium to long run solution and would not move markets enough to make a difference prior to the election. It also takes about 8-15 years from discovery to production for a well in most places.) 5. Allow more refining capacity and new refineries to be built in the country. (This is about a 15-30 year project given the politics in the country.) 6. Have a forced restart of closed or slowed down refineries. (Is this the USSR?) 7. Get the XL pipeline built. (This is in the long run also.) 8. Standardize gasoline refining and regulations across the country. (In this dysfunctional Congress?) 9. Set up a major, effective, and comprehensive energy policy in the country. (See the last sentence in parenthesis.). 10. Wait until the prices go back down and, as they say in New Jersey: forgetaboutit. (This is most likely solution to be taken.)

(These comments were submitted by Peter Gardett, managing editor of AOL Energy.)

It is patently obvious that high gas prices at the pump right now are not Obama’s “fault” – there are a couple of totally untenable actions (like chopping taxes on gasoline or releasing more oil from the Strategic Petroleum Reserve) that he could propose or take, but even allowing all the drilling the industry pushes for wouldn’t necessarily have saved the US consumer from wincing when they fill up their cars this week.

Unpack the argument a little bit, and the part of gas prices that is contributing most to the rise is oil prices. The way oil prices are determined and fed into gas prices is mind-bendingly complex, but has also so far been a system that, to mis-quote Churchill on democracy is "the worst system, except for all the others."

Rising oil prices reflect international politics, shifting storage expectations, the state of the US dollar, demand from China (now the largest consumer of Saudi Arabian oil, in case you thought it was the US), the inflow of money from investors that include everyone from hedge funds to retirees and any number of other factors. Oil industry insiders love to complain about the benchmark prices that guide oil pricing and thereby gas pricing, but those benchmarks continue to work in telegraphing complex market signals to consumers speedily and simply.

If we choose to believe that the Obama administration would rather not intervene in functioning global oil markets, and that Republican critics would prefer he let markets take their course, the only real options the President has are long-term. The scale of US oil importation is such that an “all of the above” energy strategy – including more domestic oil and gas drilling as well as biofuels and efficiency – is only the beginning. Major technology changes and cleared regulatory hurdles for new infrastructure that would reflect actual usage rather than a 19^th century economic distribution are the only way to keep the famed American way of driving intact.

Gas prices rise and fall over the short term, and the hysteria that always greets a rise is usually matched by an amazing degree of public amnesia once prices fall again. President Obama’s best hope is to time the run-up to election day with lower pump prices using the softest form of rhetoric and posturing to influence markets where he can. The tail is wagging the dog, a move Washington is surely used to.

With the average nationwide gasoline price expected to top $4 per gallon soon, and with some predicting an unprecedented and economically dangerous $5 mark this summer, we are hearing a lot today about rising gas prices -- with good reason. We are just at the very beginning of a long-awaited economic recovery – now is certainly not the time to test the waters on any action that could cause it to reverse course. I’m sure we all remember that the last time gas prices were this high was four years ago when the nation was plunging into recession.

Today rising prices hurt the American consumer and business community and threaten to derail our fledging economic recovery. A 25-cent jump in gasoline prices, if sustained over a year, would cost the economy about $35 billion, due in part to the direct impact of higher gas prices on many family’s budgets as well as the rising cost of several commodities – such as food – that rise when the cost of transportation increases. We all know that when gas prices rise, consumers cut back in other areas and the whole economy suffers.

While we can’t snap and fingers and solve the problem – this is after all a very complex issue, and oil prices are certainly influenced by many conditions outside of our borders --our own actions matter at lot and it’s those, the only ones we can control, that Congress and the Administration should focus. With that in mind, let’s look at the actions at our disposal that can temper the significant rise in prices:

Approval of the Keystone XL Pipeline – This project would deliver as much as 700,000 barrels of Canadian and American crude oil each day to refineries in the Gulf region. Increasing supply to the Gulf Coast refineries will help displace as much as 40 percent of the crude these refineries import from Venezuela and Mexico.

Expand access to offshore resources – The Bureau of Ocean Energy Management estimates that the Gulf of Mexico alone holds proven reserves of 20.43 billion barrels of oil and 184.6 trillion cubic feet of natural gas … as well as unproven reserves of 4.12 billion barrels of oil and 7.3 trillion cubic feet of gas It also predicted that both figures would grow as drilling technology improves in the future. Not to be outdone, the Chukchi and Beaufort Seas off the northern coast of Alaska hold an estimated 27 billion barrels of oil and 132 trillion cubic feet of gas. Make no mistake, the quantities of oil and gas under the waters off our coasts are vast and policies that promote more leasing and swifter approvals of new projects can make a big difference in our domestic energy supply.

Ensure regulatory certainty for all on and offshore energy projects - When oil producers are subject to constantly shifting regulations covering their projects, they tend to produce less. Consider the 2010 moratorium on deepwater drilling in the Gulf of Mexico when several rigs left the region for places like Angola, Egypt and Vietnam as a result. Policies can be changed easily and often, but the producers that must follow these polices are slowed down by an uncertain regulatory environment.

All of the above actions can be summed up in three words: improve domestic supply. We all know that supply is a key factor influencing prices. The worldwide political and economic factors that influence fuel prices may be complex, but we should not lose sight of the simple strategies we have at our disposal to take back some control by tapping our own natural resources.

The per barrel cost of crude oil is the key determinant of U.S. gasoline prices, representing three quarters of the price seen at the pump (currently a whopping $3.82 average). These prices are largely set based on the estimated global supply of oil and the predicted energy demand, a demand that is expected to increase in the years to come.

Right now, many believe that the direct price is beyond the control of President Obama, the oil and gas companies, and the man on the moon. But the truth is that relying on oil from unstable regions around the globe has not served us well. Moreover, the federal government’s inability to control public sector spending has directly contributed to the devaluation of the U.S. dollar and that has had a larger impact on raising oil prices than any politician would freely admit. The weakened dollar means that a dollar, well, doesn’t buy a dollar anymore, and that directly translates into higher costs for raw material such as oil imported from overseas.

Even without the underlying weakness of the dollar brought on by Washington’s insatiable spending habits, the price for crude doesn’t account for the final quarter of the price Americans pay at the pump, and that is where Washington isn’t acting in ways that could get these additional costs under control.

Infrastructure: Transportation and marketing represent an additional six percent of the price at the pump. The existing U.S. pipeline infrastructure is inadequate for moving the abundant resources being developed and refined in the center of the country out to the coasts. Coastal states use significantly more foreign oil than the center of the country. Shipping and trucking adds substantial costs compared to pipelines, which are the safest and most economically efficient way to move oil and gas resources. But when it comes to pipelines, this President has a difficult record to stand behind.

President Obama refused to approve the Keystone XL pipeline - which would have connected U.S. refineries to vast Canadian resources – after receiving heavy political pressure from environmentalists opposed to any further development of fossil fuels. The pipeline underwent three years of study and assessment before it was rejected. The bureaucratic delays combined with the possible rejection of projects based, not on their merit but on their political expediency, make infrastructure development a difficult, slow, and expensive process under this administration. It would be surprising to see any movement in this arena, at least before the election.

Regulations: With the support of the White House, the Environmental Protection Agency is preparing regulations on smog emissions for refineries that will increase the costs associated with refining similar to the way that EPA-mandated summer blends of gasoline add 20 cents to the pump cost of gasoline bought during the summer months.

These regulations have been temporarily delayed so as not to boost gas prices before the election, but they are in the works. This is just one example of the many regulations recently enacted by the current administration. These regulations unduly add additional and unnecessary costs to energy products.

Taxes: Processing crude oil into usable petroleum also represents about six percent of the price at the pump. This activity qualifies as manufacturing, making U.S. refiners eligible for the Section 199 deduction. Originally enacted by Congress in 2004 as a three percent deduction available to all manufacturers, the provision increased to six percent in 2007, and to nine percent in 2010. Yet, in 2008 Congress elected to freeze Section 199 at six percent just for oil and gas firms (including our fuel refiners). And, for the last three and a half years, President Obama has been pushing to exclude them entirely—a move that would increase the cost of refining, and ultimately, impact U.S. prices. Finally, federal and state taxes on average account for another 48.1 cents per gallon and 53.1 for diesel.

The President may not be directly responsible for the high crude prices, but the President’s policies can significantly influence gas prices. By making sound policy choices, federal policies do influence the price at the pump. Unfortunately, the President’s advisors have not provided wise counsel and thus far, and the administration has failed to take advantage of sound policies which could lessen the burden to all Americans.

On a recent radio address pushing for higher oil and gas taxes, President Obama said Congress can “either place their bets on a fossil fuel from the last century or they can place their bets on America’s future.” Renewable energy is important, even very important, and we need to leverage and expand the use of bridge technologies to conserve as much energy as possible. That said, world energy demand is expected to grow by 30 percent over the next 30 years, and renewable sources of energy will only be able to play a minimal role in the energy mix. Eventually we will be at a point where we can grow beyond traditional sources of energy products, but it is little more than wishful thinking to disregard traditional forms of energy.

Washington would be wise to spend a little less time hoping for the best while ignoring the current hard realities and limitations of green technologies. The fact remains that inability of the Obama Administration to reduce oil and gas prices today will have a direct and counterproductive impact on our economy for the foreseeable future.

The price of gas is tied to world markets, not the amount of drilling we do, and as much as we may wish, governmental actions are not the driver. Commentators of all stripes and political persuasions have clearly demonstrated this point in recent weeks. Take for example the commentary by two CATO Institute Scholars, or a conservative member of the CFTC. They have all agreed that the price of gas is not something a government can control because it’s larger than the U.S.. It’s tied to an ever-growing world market.

Last year, Oceana CEO Andrew Sharpless made this case in a Politico op-ed, where he shared two graphs. One clearly showed the increases in oil production and the lack of a corresponding response in gas prices. The production line went up, the price line didn’t go down as some suggest it would. His second graph showed the price of oil in the United States against global markets. In that one both lines went up, and were nearly identical. Take-away message: the price of oil is tied to the global price on the world market, not to how much drilling we do. The other take-away message: the price of gasoline is consistently going up. This is because of increasing demand.

There is simply no way to drill ourselves to energy independence. Drilling on all of our coasts would lead only to about a 3 cent price reduction in a gallon of gas– and even that wouldn’t happen until 2030 according to the government’s Energy Information Agency.

When it comes to offshore drilling, the government has already made 75% of the oil available. How can we assess whether that is enough? Well one way is to ask, is it keeping the industry busy? Have they maxed out their production? Is there excess production capacity not being used? No, quite the opposite. Instead it appears that they are hoarding drilling sites. The Department of Interior reports that oil and gas companies hold over 4,000 leases where there is still no production. These leases, roughly 67% of all leases held in the Gulf, represent significant opportunity for exploration and development. It reminds me of something my father would have said to me as a child: “Finish what’s on your plate, darling, before you ask for more.” Of course the government sold more leases in December and more sales are scheduled for this summer.

Clearly there is no shortage of opportunity or work to keep the industry busy. If there is potential for increasing production there are surely leases, already in hand, where that production can occur. And production has increased over the years. But don’t get your hopes up. Gasoline bills still haven’t gone down and more production will have the same (no) effect.

On the other hand, more production would increase profits for oil companies, but don’t expect them to give customers a cut. There is no discount for Americans in exchange for opening up our coasts. All we get is the risk. All of it. And none on the benefits.

The smart response to the increased cost of gasoline is to look at the big picture. Demand is increasing around the world at rates that will ensure that prices continue to rise. Price volatility tied to international conflicts will continue. The energy independence we need is independence from oil and we only get that when we begin to develop domestic renewable energy. The United States is way behind in that department. Starting down that path will be more productive than this endless finger-pointing.

The current spike in oil and gasoline prices is like that bad penny that just keeps turning up. And when this happens in an election year, the blame game is played at its most vitriolic level. The Republicans fault the President for refusing to open up federal and offshore lands to drilling, the President faults the Republicans for not approving higher oil industry taxes to further subsidize renewables, and the public and the media finger greedy and obscenely profitable global oil companies as the villains who are conspiring to push up prices.

In truth, political tensions in the Middle East are once again the major factor pushing up crude oil prices. Growing global demand for oil, especially from Asia and Latin America, also helps explain why prices are rising. Commodity speculation, refinery closures, and the seasonal switch to more expensive summer gasoline are additional contributing factors.

President Obama is correct when he argues there’s not much he or Congress can do in the short term to lower gasoline prices, except maybe to release some oil from the strategic petroleum reserve. Indeed, if gasoline settles above $4 a gallon this summer, the President is sure to authorize such a release, though the impact on prices will be modest and short-lived, as was the case last year when the reserve was tapped in response to the cut-off of Libyan oil.

We can’t turn back the clock. But if President Obama and the Congress had crafted a comprehensive, domestically-focused energy policy three years ago we might not be facing today’s price squeeze. America’s oil and natural gas production have grown significantly over the past three years despite administration policies that have clearly been anti-carbon. Imagine how much larger that increase might have been with more accommodating energy policies such as expanded drilling in the Arctic, on the outer continental shelf, and on federal lands?

President Obama argued in a speech last week that increasing fossil fuel production at home wouldn’t affect that global price of oil and that the way to lower gasoline prices is to use less of it. In fact, gasoline and diesel consumption in the U.S. peaked in 2005 and have been declining steadily ever since.

It would appear the President has forgotten one of the basic tenets of economics: that price is set at the margin. With its huge untapped reserves in offshore and deepwater reservoirs as well as oil shales, America has the potential to significantly boost oil supply and thereby become the price setter in the global marketplace. That’s the way to prevent future spikes in oil and gasoline prices.

President Obama owns high gas prices, whether he’s responsible for them or not. As he travels the nation trying to claim credit for glimmers of good news in our energy economy, he can’t shed blame for high gas prices, no matter how dire they seem for his reelection prospects.

So if the president isn't responsible for high gas prices, who or what is? It doesn't help that oil is a global commodity, easily transported to the land of the highest bidder. And developing nations are aggressively trading for oil, seeking to fuel economic development and ever richer populations. Concern about the combustible Iranian regime and what that means for the future of their oil production is also driving up prices. Since global crude oil prices make up about three fourths of the price of a gallon of gas, these are considerable obstacles to affordable gasoline.

There are local issues, too. Like the glut of supply at Cushing, Oklahoma, with no practical way to get the oil to refineries and buyers. This week, Obama will go to Cushing and talk about what his administration is doing to alleviate this regional bottleneck. Unfortunately for him, it means speaking in support of the southern leg of the Keystone XL pipeline, the only portion of the project advancing in the wake of his decision to deny a construction permit for the Alberta-to-Texas route. But that’s another story.

The East Coast is also suffering the closure of several refineries in Philadelphia, Delaware, and the US Virgin Islands, representing over a million barrels per day of capacity, partially as a result of the costly and at times conflicting regulatory expenditures that refineries would face should they continue operations. Earlier today, a House Homeland Security Subcommittee held a hearing on the ramifications of these closures for our security and for critical infrastructure safety. We’ll also have to worry about higher and more volatile prices for fuel in the Northeast region, especially as the supply chain for this high-volume energy market gets longer.

OK. President Obama can’t turn a dial or pull a lever and reduce gas prices. But if he’s not responsible for high gas prices, shouldn't he quit claiming credit for all the other portions of the oil market that he isn't responsible for? Like aggressive oil development on private lands giving us our highest oil production in eight years. Or our reduced dependence on foreign imports. (Well, actually Obama is sort of responsible for that. The president’s continued bad economic policies make it more difficult for us to fuel our cars, depressing our ability to pay for oil and pushing down imports. What a bright silver lining.)

But there’s another important and entirely controllable side to this conversation. Of our half a trillion dollar trade deficit, purchasing foreign oil constitutes 60 percent. That’s $332 billion that we send to foreign countries, including unfriendly regimes, instead of to domestic companies and American workers. Importantly, if we had spent that money buying American oil, more Americans would have jobs and more Americans would look at high gas prices as an inconvenience, not a crippling tax on their limited incomes.

So domestic drilling might not give us $2.50 gas, but it’s certainly not a short sighted political point, either. It’s a conceivable and feasible way to put Americans back to work, cultivate substantial wealth, and bring our trade deficit back into balance. It’s a plan to increase employment in one of our fastest growing sectors and build a vibrant, competitive, capital-rich economy. And with the most advanced, safest exploration and development technologies on the planet, we can increase output of our domestic resources safely and buy more time for President Obama’s much beloved renewables to mature enough for the market.

Who cares who’s to blame for high gas prices? It’s an argument that holds back action and leaves Americans languishing. Instead, let’s find a way to pay for them.

It is unfortunate that the media conversation about gas prices has focused so narrowly on policies that have no realistic ability to impact the costs of our oil addiction.

The reality is that the recent rise in the price of gasoline is just the latest evidence that our addiction to oil is unsustainable. It is unsustainable because oil dependence is contributing to the massive threat of global warming, which according to a report this week threatens 3.7 million Americans with increased coastal flooding, in addition to dozens of other harmful impacts. It is unsustainable because oil is a finite commodity that will eventually run out, and the oil that remains can only be processed at a massive cost to the environment. And it is unsustainable because massive increases in global demand ensure that the long term price of oil is only going to go up in the future.

The country needs to make a major commitment to getting ourselves off of oil. We can do this by rapidly increasing the efficiency of our vehicles, investing in alternatives such as electric vehicles, providing people with more transportation choices such as public transportation, including high speed rail, and making better decisions with our land use and transportation planning.

These policies are unlikely to reduce the price of gasoline. Oil is a global commodity and neither gradual reductions in oil supply nor gradual reductions in demand for oil are likely to make much of an impact on the global marketplace. What these changes will do is reduce our vulnerability to swings in oil prices by getting us off oil.

President Obama has made more progress on these fronts than any President in American history. His proposed fuel efficiency standards rising to 54.5 mpg are the largest single step ever taken to reduce either oil consumption or global warming pollution. He has proposed the first ever efficiency standards for trucks and other heavy duty vehicles. With the help of his investments in electric vehicle technology, every major auto manufacturer is now producing a vehicle that runs primarily on electricity. And his investments in transportation infrastructure have emphasized smart performance metrics, livable communities, high speed rail and public transportation over bridges to nowhere and endless highways.

Who’s to blame for rising gas prices? No one. And everyone. The recent spikes we’re all seeing as we drive around are unavoidable. They are the consequence when there are no other widely available options to fuel our cars, trucks, and airplanes. As we noted in a recent paper [http://content.thirdway.org/publications/498/Third_Way_Memo_-_Why_We_Face_More_Pain_at_the_Gas_Pump.pdf], current price spikes are the result of worries about renewed conflict in the Middle East, a growing global economy, and refineries going offline.

On the Middle East:

The oil market is spooked. Why? Tensions with Iran over their continued development of nuclear weapons, and Iran’s threats to cut off oil to Europe and close the Strait of Hormuz. Closing the Strait would shut off the shipping route for 20% of the world’s oil, dramatically curtailing supply. [Read more about the possible effects of war with Iran in our recent report http://content.thirdway.org/publications/502/Third_Way_Digest_-_Iran-Keeping_Our_Powder_Dry.pdf] In 2011, the civil war in Libya had a similar impact on oil prices, despite the fact that Libya only accounted for 2% of global oil supply.

On the global economy:

Through the end of 2011, markets were frightened by the prospect of a Greek default pulling Europe, and the world, into a deep recession. This helped keep oil and other commodity prices down. In mid-February 2012, the European Union agreed to provide Greece an additional round of bailout funding to meet its debt obligations. With an economic crisis seemingly averted, economists anticipate that the global economy, and the demand for oil, will begin to grow more quickly in 2012.

On refineries:

Every year, domestic refineries take a time-out in the spring to perform maintenance and switch to a summer blend of gas. This year, a host of refineries began maintenance early, disrupting gas supplies earlier than usual. At the same time, several refineries are closing because high oil prices have destroyed their profit margins.

Our nation must begin to provide alternatives to gasoline. Whether the option is natural gas, electricity, or biofuels, forcing oil to compete for consumer dollars, would drive prices down. Will the price spikes caused by Middle East hostility, economic recovery, and refinery shortfalls be enough to move Washington to act? Only time will tell. I for one will be buying a Volt or Prius as soon as I can.

The price of gasoline is a hot-button issue on the campaign trail as Americans across the country face more pain at the pump. Whether or not gasoline prices influence presidential politics is a matter of debate. But if they do, those who argue that the election won’t be shaped by foreign policy and national security should think again. While idle and closing U.S. oil refineries are contributing to higher gasoline prices in some parts of the country, growing global oil consumption and geopolitical crises – from the Persian Gulf to Nigeria – are having the most impact on the price at the pump.

First, some facts about U.S. oil consumption and production are in order. U.S oil consumption has declined in recent years, from an all-time-high of more than 20.9 million barrels a day in 2005 to just over 19 million barrels a day in 2010. At the same time, production from U.S. reserves has steadily increased, from about 5.18 million barrels a day in 2005 to 5.4 million barrels a day in 2010, helping reduce the demand for oil imports. The United States, for example, imported only about 49 percent of its oil in 2010, and 45 percent in 2011. As a result, the United States has been a net exporter of oil since 2010.

Yet while increasing oil production from domestic reserves may help improve our trade deficit and further decrease our reliance on imported oil, it will have little effect on the price of oil due to the ever-increasing demand abroad. As the global economy rebounds, economic growth will continue to drive up consumption for oil, especially in Asia. The International Energy Agency recently reported that global oil consumption is expected to rise 800,000 barrels a day to 89.9 million barrels a day in 2012, with Asia consuming about 700,000 more barrels of oil. And the increased demand isn’t just from China and other developing economies; Japan is projected to burn 135.5 percent more oil this year for electricity generation, in large part due to widespread nuclear plant closures as the country continues to manage the devastating effects of the March 2011 Fukushima-Daiichi accident.

Worsening tensions in the Persian Gulf over Iran’s nuclear program are also driving up oil prices. Iran has threatened to close the Strait of Hormuz in response to the West’s oil embargo, which could choke off approximately 20 percent of the world’s oil. The prospects of a closure have contributed to higher oil prices and may encourage countries to hoard oil if tensions in the region continue to worsen. In the near term, the U.S. Navy is taking steps to increase its presence in the Persian Gulf by deploying additional mine sweeping vessels and other capabilities needed to counter an Iranian anti-access/area denial campaign in the strait. The announcement from U.S. Chief of Naval Operations Admiral Jonathan Greenert may alter Iran’s strategic calculus and could help calm the oil market.

But Iran may also be seeding uncertainty in the global market in an effort to drive up oil prices and assuage the strategic effects of the sanctions targeted against Tehran. Take for example the recent report from Iran’s semi-official Fars News Agency that alleged that Tehran had suspended a 500,000-barrel oil shipment to a Greek refinery. The report was news to the Greek refiner, which said that it had received the shipment without delay. Such false reports may be intended to stir up anxiety in the global oil market, driving up prices, which could help the Islamic republic manage the impact of the oil sanctions.

But it is not just about Iran. Instability in Nigeria could have significant implications for oil prices. Recent political turmoil over national fuel subsidies and attacks by the Islamic terror group Boko Haram have rocked the country, raising concerns about stability in Africa’s largest oil producer. The country supplies more than 2 million barrels a day to the global oil market, including 11 percent of U.S. imports. Although political unrest has subsided some since the government partially reinstated fuel subsidies and the attacks by Boko Haram have been away from the country’s major oil operations, prices have ticked up slightly and investors are keeping a watchful eye on how events unfold.

Gasoline and oil prices will remain high as uncertainty looms abroad. To manage these higher prices, Americans need to consume less and look for alternative liquid fuels. The transportation sector accounts for nearly 70 percent of all U.S. oil consumption. There is no quick fix to this dilemma. Reducing our consumption will help manage gasoline prices in the near term. But over the long term, the United States must diversify its transportation fleet with new liquid fuel sources, such as algae, and investments in high performing electric vehicles. Moving away from a single-energy-source transportation sector must be part of our national energy strategy. It is the best way to hedge against so much uncertainty in the global security environment.

As Mitt Romney, Newt Gingrich, and the American Petroleum Institute have made abundantly clear in the past few weeks, the primary cause of high American gasoline prices is President Obama.

Let’s start with conflict-related disruptions around the world that have caused a supply reduction of over 1.5 million barrels per day (bpd) in global oil markets relative to this time last year, and that have the President’s fingerprints all over them: Libya; where the Obama Administration led (albeit from behind) the European and Arab League intervention, is still over 500,000 bpd short of its pre-revolutionary total; Syria, where a European Union embargo has shut off around 390,000 bpd; Yemen, where a domestic uprisings and conflict have wiped out around 300,000bpd; and South Sudan where a dispute over oil transportation fees with Sudan has taken around 360,000 bpd off the market. Then there is Obama’s direct influence in other areas of geopolitical concern built into the current oil price—violence in northern Nigeria, the health of Hugo Chavez in Venezuela, and an increasing frequency of attacks on Colombia’s main oil pipeline. Not to mention his role in technical disruptions due to bad weather in the North Sea and unplanned maintenance at Canadian oil upgraders.

But that’s not all. Perhaps the main issue propping up the oil price is the threat of military action against Iran. Here, Obama could not be more culpable. While his Republican would-be opponents for the presidential race accuse him of fretting, fecklessness, and timidity, he has maintained a moderate, cautious approach, warning against the consequences of precipitate action – in short, exactly the kind of thing that sends oil markets into frenzy.

On the domestic front, the charge-sheet against Obama is equally damning: the president has resolutely refused to allow more than 75 percent of potential offshore oil and gas resources to be opened for drilling (despite the industry having explored or drilled nearly 30 percent of the offshore acreage for which it has leases). If the administration would just open up more acreage, the US would surely be able to produce far more of its own oil. This would continue the trend that has seen record domestic U.S. oil production in recent years, a steady reduction in the percentage of imported oil—and all the relief in prices at the pump that has come along with them.

(These comments were submitted by Roland Hwang, the Transportation Program Director for the Natural Resources Defense Council.)

Every year when gas prices rise, politicians and pundits like to play the blame game.

Experts say we can blame unrest in the Middle East and increasing global demand for driving up the price of oil, not lack of domestic drilling.

What we can do to bring drivers relief at the pump is to provide more choices: more fuel-efficient cars, more clean fuel options, and more alternatives to driving. Doing so can provide drivers relief from high fuel bills, while tackling the root cause of high gasoline prices, our crippling dependency on oil.

Clean energy solutions work. Thanks to the first round of the administration’s fuel-efficiency standards, drivers already have more choice of fuel-efficient cars than ever before, including over a dozen models that get up to 40 mpg on the highway. Drivers will save thousands of dollars over the life of the car and see immediate monthly savings in their fuel and auto bills.

And thanks to the second round which will double fuel-efficiency to 54.5 mpg by 2025, drivers are ensured of seeing a rapidly growing number of fuel sipping cars, and an increasingly options to bypass the pump all together.

Doubling the fuel-efficiency standard is the biggest step in a generation to cut our oil dependency.

And we can do better. Through known technologies and policies, we can easily cut our oil imports by almost 60 by 2030 percent. At today’s oil prices, that’s the equivalent to keeping over $200 billion a year in the U.S. This means investing hundreds of billions in U.S. clean energy manufacturing leadership. And putting hundreds of billions of dollars back into the pockets of Americans to spend in our economy.

Electric cars, like the Nissan Leaf and the Chevy Volt, allow drivers to bypass high gasoline prices all together. At national average electricity prices, electric cars are the equivalent of filling up on $1 gallon gasoline, for the life of the car. Just about every major automaker will offer an electric car within the next year or two.

Smart investments in transit and infrastructure will give more people alternatives to paying at the pump, while at the same time easing traffic on congested roads. High-tech buses, light rail systems, safe sidewalks and bike paths, as well sustainable fuels, all give people more ways to get where they need to go, without being dependent on gasoline.

More domestic drilling is not the solution. The hard truth is that America does not have the resources to control the long-term price of oil. We have drilled more oil wells than any nation on earth. The number of oil rigs in operation in the U.S. has quadrupled since 2008, and we are producing more oil now than we have in nearly a decade.

More domestic drilling will mean more profits for Big Oil--$7.7 billion for BP in the last quarter alone, $9.4 billion for Exxon Mobil. (Big Oil also enjoys about $4 billion each year in taxpayer subsidies.)

Getting more oil from the Keystone XL tar sands pipeline won't bring down gas prices, either. Canada wants Keystone XL in order to get access to overseas markets and make more money for their country, at our expense. In fact, TransCanada, the company behind the pipeline, has admitted that Keystone XL would increase the price Americans pay for Canadian oil by up to $4 billion a year and raise gasoline prices in the Midwest by cutting out Midwestern refineries.

Clean energy -- efficiency, clean fuels and driving alternative--is the cleaner, cheaper, and faster way to meet our nation’s transportation energy needs. Instead of sending $100 million a day overseas to import oil, the U.S. has the opportunity to invest in its own economy, producing the fuel-efficient and clean energy technologies of the future.

Gas prices are directly tied to oil prices for the very simple reason that about 70 percent of the oil we use in the United States is for transportation. So we can blame high gas prices on high oil prices and pretend it’s a temporary problem, but that would be missing an important point. Despite all the chatter about free markets, gas prices are high because there is a lack of competition in transportation fuel markets as well as in the markets of other petroleum products, such as chemicals. We are just beginning to have large-scale alternatives such as ethanol in the on-road fuel market, but the policies implemented to accelerate the introduction of advanced biofuel alternatives are not being afforded the chance to succeed.

While biofuels currently make up about 12 percent of the gasoline supply, they make up less than 5 percent of all transportation fuels because they have not yet penetrated the airline and shipping markets. A number of airlines have tested biofuels – as has the Department of Defense – proving the potential for this market. But there is currently no policy to open this market to alternatives and create a level playing field with imported petroleum.

Similarly, there is no policy to create a level playing field for alternatives to other petroleum products. Oil displaced from the gasoline market by biofuels can disrupt other transportation fuel or chemicals markets. That’s why we need policy aimed at replacing the entire barrel of oil.

The petroleum industry has shuttered several refineries in the Northeast in the past several months, shifting to larger, more centralized refineries that are better positioned to supply export markets. This consolidation can decrease the production costs of finished gasoline, but it also decreases competition and increases the direct connection between oil prices and fuel prices.

Oil prices have increased steadily past the $100-dollar-a-barrel mark over the past 10 years, and the only temporary interruption in that trend came at the cost of a worldwide recession. We can’t afford another worldwide recession to bring down oil prices. With renewed economic growth around the world, there is unlimited demand for oil and for transportation fuels. And this is part of the reason why additional drilling can’t lower gasoline prices here in the United States. If other countries are willing to pay more than $3.00 a gallon, then there is no way for Americans to pay $2.50 no matter how much we drill at home.

Regardless, the oil industry is fighting tooth and nail against the only policy we do have to open markets and create a level playing field in transportation fuels, the Renewable Fuel Standard. Pundits are ridiculing new biofuels technology, despite successful demonstrations by the military and airlines, seeking to prevent the implementation of a new policy to accelerate market entry of biofuels for the airline industry. And Congress is looking to cut off funding for existing policies and programs that support creation of markets for renewable agricultural resources for advanced biofuels. This is lamentably short-sighted.

If our goal is truly to decrease transportation costs for consumers, we need policies that create a level playing field for alternatives to oil. This isn’t a zero-sum game with new drilling – there are good reasons to support increased domestic energy production, even if they won’t lower the cost of gasoline. But we must also extend, renew and create policies that support the development of alternatives to oil. Some oil companies and pundits say, “leave it to the market to decide our energy mix.” We have done that for 30 years, and the truth remains that there is no real free market for oil – there is only OPEC manipulating U.S. businesses and consumers and sucking resourses out of the U.S. economy. Isn’t it time to lessen OPEC’s choke hold on us all?

The best way to deal with the gasoline price issue is first to separate fact from political illusion and then to recognize that there are few short-term fixes. President Obama is right when he says that there is little he can do right now but wrong in implying that he has done all that he could have done. Sensible and realistic policy decisions over the past three years would have led to lower priced gasoline.

The bottom line is that rhetoric is no substitute for results.

While the President and his supporters rail against oil company profits, study after study has demonstrated that the return on sales is only the average of all manufacturing. A recent Wall Street Journal editorial<http://online.wsj.com/article/SB10001424052702304537904577277440911481180.html> demonstrated the average effective tax rate for oil and gas companies is about 14 percentage points higher than other manufacturers on the S&P Industrial index, the difference between 41.1 and 26.5 percent. So using oil companies as scapegoats is just a tactic to avoid blame.

The fact is there are four basic factors, among others, that determine the price of gasoline: the cost of crude oil, refining costs and profits, distribution/marketing costs and profits, and taxes.

The cost of crude is the major determinant of gasoline prices. According to EIA it had represented 53% from 2000 to 2010. Then it went to 68% in 2010 as crude prices rose. Today it is about 80%. Distribution/marketing and taxes account for 10 and 12 percent respectably. The latest data indicate that refining is losing money and not covering its costs because the price that it can sell gasoline from the refinery is less than the acquisition cost.

Supply and demand also factors into the price, something the President apparently doesn’t know. During his three years in office, he has said no to virtually every initiative that would have increased domestic production. If he had not said no to offshore drilling, no to drilling in the eastern Gulf of Mexico, no to Alaska’s coastal plain, no to Keystone XL, and no to accelerated leasing and permitting, our production would be much greater than it is. The increases he touts have nothing to do with his policies and everything to do with leases from the Bush Administration and production on private lands.

The current price also reflects instability in the Middle East and the fact that investing in crude oil futures produces better returns than investing in the stock market. Policies that get us back on the road to robust growth would reverse that situation.

Increasing the global supply of oil would put downward pressure on the price of crude. To those who say that OPEC would simply reduce its production to maintain a high price, that is speculation. If they did that they would give up market share. An alternative scenario is that OPEC would increase production to lower the price and make some domestic production uneconomical. In addition, more domestic exploration and production would have kept billions of dollars in the U.S. and created more jobs. The domestic oil industry has been a major job creator while the rest of the economy has been losing jobs.

The President cannot turn the clock back on domestic production but he can get serious about regulations that make economic and scientific sense and are cost-effective. Regulations from his EPA have imposed or will impose significantly higher costs on refiners. That will have the effect of more going out of business. EPA for example is considering new gasoline standards --Tier III -- that would require a significant reduction in gasoline sulfur levels, well below the level that has any effect on auto catalysts and emissions. The result will be to force refiners to make gasoline similar to that in California, the most expensive in the nation. While EPA says this regulation will only add 1 penny to the price, other analyses say 25 cents.

In the last 20 years, the number of different gasolines has increased dramatically as states attempt to meet stringent air quality standards. Today, mobile sources are a much smaller source of smog causing emissions and automobile emission systems are much more sophisticated. EPA should take a hard look at rationalizing the national gasoline system so the number of different gasolines could be reduced from 17.

The goal of weaning Americans off of gasoline for transportation is a distant future dream. Gasoline consumption has plateaued in spite of population growth. EIA does not project robust growth in demand over the next two decades, so there is no reason to use mandates and subsidies to force Americans out of gasoline powered vehicles into higher priced ones that are called green. Hybrids will grow in market share as the technology matures and the price differential shrinks and electric vehicles will remain an unrealized dream.

Our energy security and future will be brighter if energy realities replace wishful thinking and illusions.