Rob Bradley has analyzed crude oil and gasoline prices and makes some lucid observations amidst the hype and alarmism. Prices are in 2004 dollars--i.e. adjusted for inflation (except the most recent 2005 prices)

• Katrina severely interrupted the Gulf Coast oil industry as described by the Department of Energy’s Energy Information Administration.

• Post-Katrina crude-oil prices around $65 per barrel compare to the all-time spot high in March 1981 of $72 per barrel. This compares to the 1913-2004 average of $21 per barrel.(see fig.1)

• The average crude price can be divided into pre-1973 and post-1972, the more recent period covering the ARAMCO nationalization (1973/74) and a variety of geopolitical events driving up oil prices. The “free market” price (1918-72) is about $17 per barrel; the “nationalism” era (1973-2004) about $30 per barrel. Government ownership and control of oil outside of North America is keeping the world oil price above finding costs for new supplies, making subsoil and infrastructure privatization an attractive public policy reform.

• Domestic retail gasoline prices in 2004 were below the 1918-2004 average of $2.08 per gallon. Post-Katrina, prices are above their long-term average. Labor Day spot gasoline at $3.07/gallon is just below March 1981’s peak, reported EIA. See fig.2) Moreover, today’s gasoline is a superior, specialty product with much lower emissions than in decades past.

• The good news is that even with the recent surge in crude prices, gasoline for consumers has increased much less than crude oil. Comparing $65 crude oil and $3.07 gasoline, crude is 223% above its historic average and gasoline only 44% higher. (see fig.3) This reflects improved efficiencies in “midstream” and “downstream” sectors: crude-oil transportation, oil refining, oil-product transportation, and marketing.

• Gasoline shortages were the exception and not the rule over Labor Day weekend even with hurricane’s disruption of vital industry infrastructure. 1970s-style gasoline shortages from price and allocation controls were averted. Three dollar gasoline rationed available supply to demand and encouraged motorist conservation, a textbook example of market forces at work.