OK, remember you saw it here first. “Unplanned refinery outages. Almost sounds like the California electric supply a few years ago.” I’ve since heard this on the radio news. (Cannot remember where, I’ve been cross country this week.) Gas prices are now officially over $3/gallon for regular. In the Pacific Northwest, prices were over $3.20/gallon for the same grade. And this coming just about one month after the US Energy Information Agency said that we’ll be seeing lower gas prices this summer.

Lower than what?

With continued “unplanned refinery outages” (oh they learn so fast) just as we’re moving into storm season (seems the tornados are starting out pretty strong this year), I cannot even begin to predict. If we actually get a storm in the Gulf of Mexico, I predict we’ll see $4/gallon this summer.

But it really does not matter. This summer, next summer. We’ll see $4/gallon for regular gas by the end of 2008. The sooner the better, as discussed in my last post, for keeping prices lower longer. Of course, I’m not convinced that lower prices are a good goal. higher prices not only encourage conservation (read as “reduce global warming emissions) but also make alternative fuels more profitable. And nothing drives investment and invention like profit.

So do we attempt to take the lead and seize the moment? Tax gas up to $4/gallon now, and collect the revenues while we wait for the actual price to go up? We could phase it in over the next 3 months. But if a hurricane hits in the Gulf, we might be more than a bit behind the actual price rise.

Anyone else notice that gasoline prices have jumped 50 to 75 cents in the last two months? I have not looked back at the historical figures, so I don’t know the exact dates, time, costs, but I do know that I’m now paying over $3.00 per gallon for regular in Vermont. (This Vermont Fuel Price report is for April 3. Prices are up $0.40 since then.)

Now, I’m not surprised that gasoline is at $3.00/gallon. I knew that it just went down for the elections and would go back up again afterwards. But I am shocked at two things. First, it’s going up quickly. Second, and more surprising, is that we’re not hearing about it. It’s the great non-story. Here we are, close to the prices we saw in this area for gasoline after Katrina, yet there has not been a hurricane (or hard winter, or spring flooding, or any new war, or any other large oil-influencing event). So what gives? Anyone have an opinion? According to an EIA (US Energy Information Agency) April 10, 2007 report, “U.S. retail motor gasoline prices surged over the last 2 months, rising by more than 60 cents per gallon due to higher crude oil prices, unplanned refinery outages, increased demand for gasoline, and low levels of gasoline imports from Europe. Although gasoline prices began their seasonal increase about a month earlier than usual, the rapid rate of price increase is projected to slow over the next few months.” Unplanned refinery outages. Almost sounds like the California electric supply a few years ago.

So now we have $3 gas again. Of course, when we had $2.25 gas, it was “too expensive”, and so we could not add a higher tax on it to fund renewable and alternative fuel technologies. We needed to keep the price down. Well, the price just went up again, and ALL the money is going into the oil companies coffers. Don’t get me wrong, I’m for free enterprise and profit-making companies. I’m also for taxing things that are bad for us, to try to create things that are good for us. (It’s called creating social policy with tax policy. We do it all the time in the US, don’t let anyone tell you differently.)

What if we had increased the tax on gasoline when it was at $2.25/gallon. Make the tax increase the cost to $3/gallon, with the tax reducing if the gas price increased, to hold it at $3/gallon. What would have happened? Most likely, several things:

- We would now have a LOT of money to fund some research, subsidies, or other programs with to encourage alternative fuels, clean vehicles, or anything else we wanted.

- Poorer folks would have a hard time paying for gasoline (I’m not sure I buy this, but I’ll go along for the ride. I mean, poor folks have a hard time paying for everything.)

- Businesses would know for certain what to budget for gas. $3/gallon. No question. (Assuming it did not go ABOVE that level. And our government says it will not even get to $3, so, oops, we’re there already, sorry.)

- We would likely have used less gasoline. Higher prices do encourage some conservation, even in the US.

- Lower gasoline usage would assist in reducing the price of gasoline (less demand, less price pressure). So maybe the price of gasoline really would stay below $3.

- People would complain that gasoline is too expensive.

So, to keep gas prices low, we need to increase the price of gas to reduce demand, and to create funding for gasoline alternatives which also help to keep the cost of gasoline lower by creating alternatives.

But of course, we cannot do this, because at $2.25/gallon, gasoline is too expensive to add taxes to. Oops, sorry. Gasoline is now $3/gallon. And soon we’ll be seeing those beautiful, but potentially devastating storms in the gulf, just like the slides from Al Gore’s presentation.

Now what do we do?