The media are back to fear-mongering about “record fuel prices” again and their reports need to be taken with the usual large grain of salt.

There have been some recent price shocks, most notably in California, where a refinery fire has created spot shortages and all-time record prices in some areas. However, as the charts show, the national average price has remained well below record levels all year.

What is interesting to see is the difference in ranges between the price of benchmark West Texas Intermediate Crude on the New York Mercantile Exchange and the retail price of a gallon of gasoline. While oil has remained largely in the middle of the range between the all-time record high and the lowest price since 2005, gasoline prices have remained in the upper range, significantly closer to the record high than the seven-year low.

Unlike the speculator-driven run-up in prices last spring, which were based on incorrect assumptions about the impact of sanctions on Iran and concerns about supply, the increase seen this fall does have some basis in reality. As mentioned, a West Coast refinery fire has led to record level prices in some parts of California and other refinery issues have led to speculation that there would be shortages in other parts of the United States.

As of now, the supply concerns have proved groundless and the economic slowdown in China is reducing demands, leading to a decline in oil prices, which are now closer to their 2012 low than their high for the year, let alone the record established in 2008. Since gasoline prices tend to be slower to come down than they are to go up, drivers probably won’t see significant relief for a few weeks.

One of the big questions consumers ask is why oil prices vary so much. It’s currently popular to blame President Obama or former President George W. Bush, but neither of these men had anything to do with the dramatic rises and falls in prices at the pump. If one wishes to assign blame to a President, then that President has to be Bill Clinton, who signed the Commodity Futures Modernization Act that was passed by both houses of Congress in 2000.

The CFMA was supposed to ensure the United States could maintain a competitive position in the over-the-counter derivative market by deregulating certain exchanges. Unfortunately, the CFMA was so successful, especially with the inclusion of the “Enron Loophole” championed by then-Texas Senator Phil Gramm, that it allowed the Enron debacle, the 2008 financial market meltdown and the run-up in fuel prices seen in the past few years.

A good explanation can be found in Kenneth B. Medlock III’s 2009 paper, “Who Is In The Oil Futures Market And How Has It Changed”, prepared for the James A. Baker III Institute for Public Policy at Rice University. Medlock explains how the CFMA brought in pure speculators, such as financial institutions, that have taken over the markets and added, by some accounts, as much as $40 to the price of a barrel of crude.