Stan asks an excellent question:

If consumers are willing to pay higher prices for gasoline, why should we think that energy companies are going to do anything but charge those higher prices?

I'm not one who blames oil companies for high prices.  I'm more impressed by how quiet the media gets when oil prices are low.  In the U.S., we act as if God decreed low energy prices. We act as if the laws of supply and demand don't apply to us.

You don't have to spend much time driving in Europe to see the difference that high gasoline taxes make.  People drive smaller cars, mostly diesel fueled, and public transportation is first class.  People also live very close to their jobs and to all the services they need.  They actually walk to market.  What a concept?  It keeps you slim too!  Try walking to most U.S. stores, and you're very likely to end up as a pedestrian fatality.

Stan asks an interesting question:

If consumers are willing to pay higher prices for gasoline, why should we think that energy companies are going to do anything but charge those higher prices?

We should not think anything but that, except that we should acknowledge that producers of any good might be willing to trade off some short term profits for greater profits over the longer term.  With gasoline, we are certainly not in that environment, whether or not we ever were.  (Were low energy prices of past decades "teaser" rates?  Did we get discounts on our first "hits" of petroleum?)

He then asks two other questions that come up in various guises when dealing with economic policy:

In other words, in what's supposed to be a market-driven economy, aren't we complaining about the market working?

[...]

Finally, are we starting to think of gasoline as a public good that the government should provide?

Pete's post on gasoline prices obviously hit a nerve.

So here's my question:

If consumers are willing to pay higher prices for gasoline, why should we think that energy companies are going to do anything but charge those higher prices?

Much of this was prompted by Pete's post.  We..and I'm definitely including myself in this category...have lives that assumed that relatively cheap energy would continue.  We have gas guzzling cars, like air conditioning, drive many miles to work, haven't supported mass transit or oil altenatives, etc.   We might not like today's higher prices, but didn't we set ourselves up for this?  Whosever said that prices would always be low?

In other words, in what's supposed to be a market-driven economy, aren't we complaining about the market working?

Yes, I know that supply is being set by a cartel.  But given the amount of refining capability and the worldwide demand, it's not clear to me that pumping more oil would make that much of a price difference in the current environment anyway. 

Pete has an excellent post below on gasoline prices that has garnered a great deal of attention.  Take a look, for example, at this from Real Time Economics, which is part of the Wall Street Journal online.

First, it's great to be in the company of bloggers-in-crime like Pete and Andrew.

But beyond the self congratulation is a question: Why should anyone be surprised that there may be...or are...speculators on the price of oil?

If U.S. consumers are willing to pay ever higher prices for gasoline -- and so far there's absolutely no indication that they're not -- why shouldn't energy companies continue to raise those prices. That's textbook economic theory.  And if prices are going to continue to rise, or if some believe they will, isn't speculation likely?

In a CNBC interview this afternoon, when asked by Maria Bartiromo about how much of the blame for the recent oil price rise should be put on speculators, Treasury Secretary Hank Paulson said, "This is not about blame, this is about supply and demand," he said in an interview on CNBC television. "All the research we have done shows that speculators and investors have had very little impact on this." Traders and longer-term investors tend to take positions on both sides of oil market transactions, long and short, thus being essentially price receivers rather than price setters.

What research was he talking about? Here are a few possibilities.

Yesterday, the Bank of England's minutes of May 7-8 stated:

1. If drivers continue to be willing to pay higher and higher gasoline prices, why shouldn't we expect them to keep rising?

2. One of the cell phone companies advertises that it has "more bars" than anyone else. Wasn't there a time not too long ago when that would have been an ad for a resort?