Pump Rage? Get Even by Buying ExxonMobil

Higher prices at the pump today are a matter of simple economics. U.S. refiners have the ability to churn out 17 million barrels of gasoline per day. Demand is around 22 million barrels per day. To make up the difference, we bring in gasoline from foreign refiners, which means that, at the margins, pump prices are set by import prices.

Total U.S. demand for oil products is up 2.7% year to date, boosted in part by the surge in cold weather in February. But since we are far from the only country importing gasoline and other key refined products, we don't have a lot of say in what those prices are.

Gasoline, like crude oil, is auctioned worldwide to the highest bidder, and with the dollar weak and overseas economic growth strong because of our fantastic appetite for iPods made in China and T-shirts made in Costa Rica, we have to pay up to keep our supply coming in. And that's all there is to it.

With U.S. refinery capacity now at ridiculously low levels due in part to lack of investment in new plants amid harsh environmental rules, any little change in the supply chain has an amazingly powerful effect.

If there's a blip in supply from Nigeria, where violence is raging, or if there's a refinery accident that causes a kink in capacity, the amount of gasoline and diesel available for American consumers shrinks dramatically. Price then becomes the great allocator of this scarce resource. Right now, U.S. gasoline inventory is at a record low, with just 20 days' supply available.