What’s happening?

Feeling the pain at the gas pump?

Prices soared last week to an average $2.91 a gallon, up 68 cents from a year ago, and even Republicans called for President Bush to investigate potential pricing abuse at oil companies. On Tuesday of last week, he asked for an investigation.

What determines the price of gas?

Ask yourself what determines the price of coffee or lemons. Costs of raw materials, production, labor, marketing and distribution, supply and demand, and taxes, factor into most products we buy. Depending on market conditions, the purchase price for the retailer, and how difficult it was to put a lemon on the shelf will affect the price, and affect it differently in different locations. For instance, it may be less expensive to buy a lemon grown in California at a farmer’s stand than at a grocery store in Missouri. It didn’t cost as much to get it there.

It’s the same for gasoline. In this case we’re talking about oil companies who refine the gas (the farmer of sorts) and the gas station. (This doesn’t explain why gas prices near refineries are still high. If anyone has an explanation, please pass it along.)

The Energy Information Administration breaks down the costs in a gallon of gas like this:

-         Oil prices: 47%

-         Federal, state and local taxes: 23%

-         Refining costs and profits: 18%

-         Distribution, marketing and retailer costs and profits: 12%

> The EIA has a comprehensive but readable explanation of this breakdown

So why are gas prices so high?

Well, there are a lot of factors. Remember when gas prices spiked around Hurricane Katrina? Part of that was due to a fear of shortages.

But again, the key raw material in gasoline is crude oil, and the price of oil has doubled since 2004, trading around $71 a barrel.

What’s the big picture?

Tensions in the Middle East are causing concern over access to oil supplies there, which is contributing to the rise in the cost of crude. With some traders predicting $100 oil, we’re not likely to get a big break in gas prices. And with some 223 million cars on the road and millions of commuters, gas prices are likely to be a political hot button as we head into 2006 congressional elections this fall. They’re also likely to impact our pocketbooks.

> Check out the latest gasoline averages

> Other steps President Bush took last week in regards to gas prices