The price of gasoline has everything to do with demand, and little to do with supply. In particular, it is the price elasticity of demand that is driving gas prices higher.
Our demand for gasoline is what economists would describe as extremely inelastic. This means that as the price of gasoline changes, the demand does not change much. Think about it. The price of gas could drop to 50 cents per gallon, and we would not change our consumption much. Sure, you would go and fill up your tank quickly, but you can only drive so much, and you are not going to burn an extra 100 gallons each week just because the price of gasoline went down. Likewise, a raise in price to $4.50 per gallon would not cause most of us to decrease our consumption much. We are married to our vehicles, and need (sic) to drive about the same this week as next week, even at higher costs.
So, because the supply of gasoline is controlled by an oligopoly, they can charge whatever they want for a gallon of gas, and we will pay it and not make much of a change in our consumption patterns. Granted, there is a breaking point at which Americans will earnestly start consuming, but your guess is a good as mine at what dollar amount that will be.
We certainly are not there yet. Get on a freeway and watch the 6,000 lb luxury gas guzzling SUVs fly by at 80+ mph.
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