Few states taxes increased during the run-up of early 2008.

Refining costs also account for 19% of the price at the pump. Most refining takes place close the market, although the U.S. is served by some refineries in the Caribbean. The greatest amount of U.S. refining capacity is along the Gulf Coast (EIA, 2009). There is no evidence that an increase in refining costs occurred to justify the price increases recorded. However, there was a capacity shock during Hurricane Ike. The impending hurricane forced refineries to cease operations. The threat of supply shortages caused a rebound in prices, which had been declining over the course of the summer prior (Schoen, 2008).

The final variable, marketing and distribution costs, is often cited as a source of gas price spikes. Gasoline companies are handed significant blame, although more often than not they are merely the messenger that the public is shooting. The...
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