ATLAS SHIRKS. 

Today, as oil flirts with $63 a barrel, gasoline in San Diego costs an average of $3.20 a gallon (source UCAN Gas Project).

As a result, you can expect the usual gang of oil pundits to proclaim that our high prices are all about "supply and demand," and that the cost of oil is the primary force behind our all-time record high gas prices for the month of March.

But there's a problem with that logic: Last year on this day, San Diego gasoline cost just $2.67 a gallon, and oil cost almost $2 more per barrel (source Energy Information Agency).  That's right, on the same day last year gas cost 53¢ less per gallon, while a barrel of oil was selling on the NYMEX for $1.76 more than it is today.

The fallback position for the oil industry has been that demand has increased while the ability to produce clean gasoline has been reduced by environmentalists and NYMBYs who will not allow the oil companies to build refineries in California. This statement borders on an outright lie. The reality is that since 1990 the oil companies have closed 18 refineries because the oil industry has been aggressively shutting them down to restrict supply.

The result is a dysfunctional market where seven refining operations control 91.5% of the gasoline sold in the state. This is too much gasoline in the hands of too few. Perhaps the worst example of a refinery shutdown is Shell's recent attempt to close its Bakersfield operation because of sagging profits. The truth was that Shell Bakersfield was the most profitable refinery on a per gallon basis in the entire U.S.A., (source),  and that the closure was motivated purely by a desire on Shell's part to restrict supply (source: United States Senate Committee on the Judiciary Testimony by economist Tim Hamilton, February 1, 2006).

Right now, San Diego consumers are paying the highest price ever for gasoline during the month of March, and we are on track for breaking the all-time record high of $3.42 a gallon set on May 11 of 2006. 

Only  fools, oil executives, and Federal Regulators could look at the difference between the historical cost of oil and the price of gasoline and declare that California has a free market.