As directed by lawmakers, who accuse oil companies of manipulation and overcharging almost every time gas prices rise, the Federal Trade Commission once again investigated price increases for gas and oil, this time for the increases during the spring and summer of 2006 (see chart above, click to enlarge). The FTC's report was realeased a few weeks ago, and here is what it concluded: The fact that the price increases were a worldwide phenomenon, coupled with evidence that U.S. refiners increased output once their refineries were repaired and back online, tends to support our conclusion that the 2006 price increases were caused by a confluence of factors reflecting the normal operation of the market, and also tends to explain why we did not find evidence that those price increases were caused by activities that violate the antitrust laws.
The FTC concluded that gas prices rose in 2006 for 6 factors relating to Supply and 1 factor relating to Demand:
1. Seasonal effects of the summer driving season.
2. Increases in the world price of crude oil.
3. Increases in the price of ethanol.
4. Declines in the production of gasoline, due to refiners' transition to ethanol.
5. Persistent refinery damage related to 2005 hurricane damage.
6. Refinery outages caused by unexpected events and required maintenance.
7. Increased Demand
In other words, the FTC concluded that market forces of decreased supply coupled with an increase in demand caused gas prices to increase in the spring/summer of 2006. As one commentator said:
"Once again the bogeyman turns out to be nothing more sinister than the law of supply and demand. Sure enough, when supply dwindles and demand goes up, so do prices. Big surprise. But every time gas prices go up, a certain kind of politician is shocked, shocked! And demands an investigation. Which is a lot easier than taking Economics 101 all over again."
I think he's implying that politicians have already taken Economics 101, but I'm not so sure about that. Also, notice that two factors for rising gas prices are directly related to ethanol, which Congress mandates and subsidizes!