Gasoline is going to rise above $4/gallon this summer. Most of us are going to be angry because our budgets will be strained badly, and we'll go looking for culprits. I'm writing about this today to explain, in as simple terms as I can, that there are no culprits. The oil companies are not screwing us -- quite the contrary, they're making less and less from the sale of refined fuel, but continuing to refine it anyway. The government is hurting us a little, but not all that much. Environmentalists are hurting us by preventing us from building refineries, but new refineries wouldn't affect anything for another 10 years or so.

The price of gasoline is controlled by simple economics. I wish it weren't so, because like the rest of you, I want to know who I can smack to make the problem go away. But it's so, and the problem is not going to go away.

By the way, the current price of gasoline is not the highest it's ever been, in inflation-adjusted dollars. If the current price of gasoline is $3.80/gallon, the price of gasoline in 1979 reached as high as $4.10/gallon expressed as 2008 dollars. This is a rough calculation based on the price of gasoline in Texas from 1979 to 2008, using the data shown here. But it's still pretty high, and going higher.

Let's start by showing where the price of gasoline comes from. The graph below comes from the US Energy Information Administration, and shows that most of the cost of gasoline comes from the price of crude oil: 

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