Why Gas Prices are so F***ing High Right Now

As this is an election year, the politicians are all being really stupid.

Myth #1: It's because Obama rejected the Keystone XL Pipeline.
The problem is not about the supplying tar-sands oil to gulf coast refineries in 7 years.  Even if the Keystone XL Pipeline gets approved, gas prices would still be this high.  Also, there is no guarantee that oil carried by the Keystone XL would be used in America-it would be introduced to the world market.  Rejection of the Keystone has the following affects: (1) encourage Canadians to build refineries in Alberta, (2) encourages an oil pipeline to the Pacific which would probably happen anyways and would also be introduced to the world market.

Myth #2:  It's because of lack of domestic production driven by anti-oil liberals.
Domestic production peaked in 1971.  This is not politically caused, it's caused by the fact that the U.S. only has 3% of the world's proven reserves and all the easy oil in the U.S. is gone : (.  There have been plenty of Republican and conservative regimes since 1971 yet this 1971 is still the peak.  Domestic production has actually increased under Obama.  Newt Gingrich is right when he says America is an energy rich nation.  It's just that its not in oil, its in coal, natural gas, sun, and wind.

Here are some facts:
Fact #1: It's because of Iran.
Iran is the second leading producer in OPEC after Saudi Arabia.  The latest round of "sanctions" against Iran are heavily based upon oil, unlike previous sanctions.  Iran is super pissed and is cutting down on supplies to the West, therefore, raising oil prices for the entire world market.  This current oil price movement shows how much more powerful Iran's oil production is over Libya's oil production.  The effect of Iran's partial cut in production has caused more market reaction than the Libyan civil war.

Fact #2: It's because of the current market dynamics surrounding pipeline/refinery distribution and refinery economics.
The business model is to ship oil to regional refineries to be refined into gas, which would be distributed in that locale.  This is why refineries are all over the country.  Refiners have long suffered in this arrangement.  Their profit margins are not very high/not very existent.  To exercise more market power, refiners have been cutting down refining capacity to avoid "over-supplying the market (see here, here, here).  Thus, refiners can have increased profit margins (or at least not lose money) to pass off to their customers (aka people who buy gas). 

Economists say there's not much a president of either party can do about gasoline prices, so let me explain this with a conspiracy theory.

Conspiracy theory: This current new equilibrium of high gas prices is a massive conspiracy between environmentalists and big oil companies against car manufacturers.  High gas prices helps big oil (my stock in ConocoPhillips has gone up a lot lately).  High gas prices will help liberal causes by encouraging manufacturers to meet increasing market demand for fuel efficient vehicles.  Car manufacturers lose out because gas guzzlers have much higher profit margins than small, fuel efficient vehicles.