Energy Markets: Gasoline Price Trends

Soaring retail gasoline prices have garnered extensive media attention and generated considerable public anxiety in recent months, particularly in the aftermath of Hurricane Katrina. Prices in many areas hit by the hurricane saw retail gasoline prices increase to over $3.00 per gallon, and in one reported case to almost $6.00 per gallon, with some gasoline stations running out of gasoline entirely. The availability of relatively inexpensive gasoline over past decades has helped foster economic growth and prosperity in the United States, so large price increases, especially if sustained over a long period, pose long-term challenges to the economy and consumers. This testimony, as requested, addresses factors that help explain how gasoline prices are determined and what key factors will likely influence trends in future gasoline prices.