Yes, it sounds crazy, but it is really simple economics.  The current rise in prices is due mainly to a shortage in refining capacity, not a shortage of oil.  The government is pushing biofuels with many subsidies.  That is causing the oil companies to reevaluate plans to increase refining capacity.  It would be financially foolish for them to invest money if the demand is going to disappear due to the government’s biofuel policies.

Any way that you look at this, the consumer comes out a loser because of the government’s intervention in the private market.  Even if biofuels are able to meet the demand, consumers will pay heavily.  The cost won’t show up completely at the pump but it will be reflected in your tax bill.  Ethanol and other biofuels can not compete with gasoline on the basis of the cost to produce it or with the amount of energy produced per gallon.  The wisest thing the government could do is to leave biofuel development to the private sector.  The subsidies lessen the incentive to produce these fuels as efficiently as possible and increase the total cost to taxpayers.

[tags]gasoline, biofuels, ethanol. government, subsidies, cost, price[/tags]