It always fascinates me when an issue becomes hot and dominates the news. Why did it become so newsworthy? Did we experience a drastic change that led to the issue or was the cause more gradual and not noticeable until a tipping point was reached?

The price of gasoline is a great example. Any “stupid” person knows the economy drives election outcomes, and our pump pain could influence the casting of ballots in November (if the current trend continues). Yes, the pain is real and I wince every time my gas-guzzling vehicle tallies grossly large numbers on the pump screen. But how did we get to this point? It may just be me, but high gasoline prices were seemingly not on the radar until recently. Did the prices suddenly spike or has the change been more gradual over time? Let's let data tell the tale.

First, let's put our current “pain” in context by looking at the historical trend of gasoline prices. Graph No. 1 shows the United States’ monthly city average price for regular gasoline, from January 1976 to June 2008. The price increases over time but we would reasonably expect that due to the increase in cost of living over the time frame. Graph No. 2 shows the same prices but uses the consumer price index to express the prices in 2008 dollars. From this perspective, we felt approximately the same pump pain in the late ’70s to early ’80s. If we broke down the overall price data into stages, we’d see that the price of gasoline started to consistently increase in approximately April 2000.

How about the rate of change from month to month? The rate was fairly consistent from January 1976 to approximately February 2000. The magnitude of change increased in March 2000 and again in September 2005. Stated another way, the month-to-month variation in gasoline prices seemed to increase in March 2000 and again in September 2005. To me, that signals instability.

I'm left with this thought: Our current pump pain was a dull toothache for some time. We felt it but kept moving, and hoped it would go away. Now we are realizing that the tooth must be pulled.

So the question is, what caused the increase in gasoline prices? Countless Web sites (some official and some not) go into great detail about the reasons for gasoline price increases. After surfing many of those sites, I'll offer my humble opinion.

First, let's consider how gasoline is made. In the simplest of explanations, gasoline is produced when crude oil is distilled in an oil refinery process. So a main raw material for gasoline is crude oil. According to multiple sources on the Internet, the cost of gasoline is comprised of four main factors. Approximately 50 to 70 percent comes from the cost of crude oil. Refining costs make up 10 to 17 percent. The balance comes from distribution and marketing (6 to 12 percent) and taxes (11 to 17 percent). Logically, we should expect the price of gasoline to be tied to the price of crude oil. And the data supports that. If you graph the average annual price of crude oil versus the average annual price of regular gasoline from 1976 to 2008 (stated in 2008 dollars), you can see a strong, linear relationship between the price of crude oil and the price of gasoline. As crude oil goes, so goes the price of gas.

Next, you can graph the trend of average annual crude oil price from 1976 to 2008, stated in 2008 dollars. Based on the data, the price increased in 2000 and has steadily increased since 2003. Compare this picture to graphs No. 1 and 2, and you see basically the same trend. Now the question becomes, what caused the price of crude oil to increase in 2000 and beyond?

Well, let's start with the sources of our oil. According to the Energy Information Association (EIA), in 2007 58 percent of crude oil consumed in America was imported, while 42 percent was produced domestically. Domestic production of crude oil has been decreasing since the mid 1980s. Of our imported oil, 49 percent came from the western hemisphere (North, South and Central America), 21 percent came from Africa, 16 percent from the Persian Gulf (Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates), and 14 percent came from other sources.

From year to year the top five exporters of oil to America are Canada, Mexico, Saudi Arabia, Nigeria and Venezuela. Any political unrest or supply disruptions in those regions can affect pricing, and there have been such occurrences over time. The EIA gives a chronological summary of issues affecting oil prices from 2000 to today. The top four reasons for price increases are OPEC production cuts, conflict with Iraq, weather issues (hurricanes), and unrest in Venezuela.

So there are definite assignable causes for the increase in crude oil prices, which in turn alter gasoline prices. They are more short-term in nature, though, and can't completely explain the consistent increase since 2000.

For explanation, consider how the law of supply and demand plays out in the energy realm. The law of supply says that as the price of a product increases, supply will begin to increase. Everyone wants a “piece of the pie.” If you graph the average annual price of crude oil from 1970 to 2007, you’ll see that between 1970 and 1980, the price of crude oil steadily increased, as supply exceeded demand. That follows the law of supply.

The law of demand says that as a product's price decreases, demand will eventually increase as consumers take advantage of the lower prices. In the period between 1981 and 1994, the price of crude oil steadily decreased and accordingly, demand exceeded supply in every year -- the law of demand at work. From 1995 to 2007, there were no significant, lengthy runs of supply exceeding demand, yet the price steadily increased.

I'm not an economist but the law of supply and demand appears to hold from 1970 to 1994. After that, it seems to break apart. Theoretically, if the price of a product starts to increase, demand or consumption will adjust (downward) accordingly. At a certain price level, consumers say “Enough is enough.” They take their purchasing dollar elsewhere.

Gasoline seems to be different. The prices continue to increase but consumption has not reacted accordingly. In fact, in 2006 and 2007, demand exceeded supply. Why? Well, for one thing, we don't have many other options. We can't immediately quit using gasoline altogether. There aren't many viable alternatives at the present time.

Several solutions are being proposed by experts and political leaders. I don't know if there is a single, best solution. Two ideas seem to be more prevalent than others: more domestic production of oil and finding fuel alternatives to gasoline. Both ideas have merit, based on the above objective analysis.

For now, though, I'll settle for a strategic plan to show us where we need to go as a nation to avoid more toothaches in the future.

Stephen Deas, an engineer who enjoys data analysis, can be reached at sd@qualitymindsinc.com