Neither Kerry or Bush have an oil policy that will do anything.
Kerry wants to contribute to current price volatility issues with his "renewable energy" push, brought to you by the good people at ADM and you local non-partisan corn belt senator. Sure it replaces foreign oil (thanks to a $.50 [? $.48]/gallon) subsidy to make it competitive that comes out of our highway funds!
Bush wants to give more handouts to big oil and the rest is fluff (with the exception of reducing the number of speciality gasoline formulations required for Clean Air Act compliance). Drilling in ANWR is a non solution (about the same minor impact as the proposed minor fuel efficiency increases that were soundly defeated by the efforts of automaker lobby). Good idea if you want to pop some short term profits though. You can still get more, cheaper oil overseas.
OPEC pretty much sets the base price. OPEC members have resisted cheating in recent years, which has helped keep the prices high, but not so high that demand would be impacted. Not much incentive for non OPEC members to lower prices soon either.
The price volatility (large periodic spikes) we've seen for a few years now is due to the fact that we are a free market with an unregulated oil industry. In 1981, shortly after the price controls of the 1970s were lifted, it was realized (by the oil industry) that there was an over abundance of refining capacity and low refining margins. Without collusion, the industry did what made good business sense and reduced the number of refineries by 50 percent, but increased capacity at each to meet demand (and now current demand).
The refining industry now operates at an effecient 98 percent capacity during peak summer months. This means, that if a pipeline breaks, or there's a refinery fire like the recent BP fire in Texas, there's little room to bring more supply into the market or to shift supply (especially since many areas require its own "special" reformulated gasoline because loopholes in the environmental law allowed for multiple, local solutions to the same basic requirement as noted earlier).
Since gasoline is a commodity, you get the same type of pricing reactions on the spot market as you get anytime there are potential shortages of supply and customers are desperate to avoid having dry tanks. This gets passed along to the consumer. By coincidence, major oil companies/refiners tend to make record profits during these periods. No real incentive there to do all that much about the situation
So, there are some things that can be done to somewhat decrease volatility and add increased price stability. But, short of regulating the industry, there is little that can be done to eliminate the issue entirely. There just aren't going to be any new refineries built any time soon, or any overcapacity added at the existing ones much beyond what we have now. BTW, if you use diesel, just wait until 2006/2007 when the stringent diesel sulfur regs hit.
Charon
