Why is gasoline so expensive here, when it's so very cheap elsewhere? And whatever happened to Prime Minister Harper's suggestion of a few months ago that the federal government should forego the GST on the price of gasoline above 85 cents a litre? Today, that policy would bring the cost down by about 3 cents-not much, it's true; but every little bit is welcome.

In Iran, gas costs about 11 cents a litre; in Dubai, 22 cents; in Venezuela, it's only 12 cents. Yet in Europe, it's well over $2 a litre; and in Canada, $1.40.

In my view, three main factors boost the price of fuel here and in Europe:

1. Probably the primary cause is a lack of refinery capacity, which creates a gasoline supply shortage, regardless of the price of oil. Several refineries knocked out by Hurricane Katrina haven't yet been put back into service. And no one wants a new refinery in their neighbourhood-the familiar 'NIMBY' (Not In My Back Yard) complaint.

2. Speculation on oil futures is distorted by belief in the "peak oil" theory that says we've already extracted more than half of accessible oil reserves. But remember: similar forecast in the 1970s said, we'd be burning the last barrel of oil before now-but new fields discovered and new techniques for extraction have doubled reserves since then.

   Some geologists, like Jerome Corsi, even dispute the theory that oil comes from dead dinosaurs; he and a few others point to the regeneration of once-depleted Gulf of Mexico wells, and the fact that there's methane on Titan (one of the moons of Saturn)-where there haven't been any known dinosaurs or other organic debris. Corsi says oil originates deep in the earth's crust-much deeper than any fossil remains. Whatever the truth of these speculations, other scientists (like Dr. Richard Pike, a former oil industry executive, now chief of the UK Royal Society of Chemistry) say the methods used by the oil industry to estimate reserves are excessively conservative, and the actual reserves are more than double the stated levels.

3. Big Oil, awash in profits generated by fear of shortages, has been slow to explore other energy technologies. Oil remains the most compact energy storage medium yet discovered. But new technologies on the horizon-both for energy storage and for energy recovery-promise to replace oil within a matter of a few decades.

The best thing government can do is get out of the way of new entrepreneurs seeking profits-and reduce excessive taxes.

• Part 1
• Part 2