Brad DeLong, the Berkeley professor, star blogger and occasional FT contributor, has taken issue with a piece by my colleague Clive Crook on the US CAFE (Corporate Average Fuel Economy) standards.

Prof DeLong’s argument is that, while Clive may be right about the economics - you get an awful lot more fuel efficiency bang for your buck from taxes than you do from CAFE standards - he is being "naive" about the  realities of US politics.

He may have a point that unlike a higher fuel tax, a tighter CAFE standard could actually pass into law. Certainly it will be hard to rally opposition against a strategy that even the White House backs.

But on the other hand, the cost-effectiveness of a fuel tax is so much higher, at least if the figures from Mark Jakobsen of the University of California at San Diego are to be believed, that it is hard to give up on the politically unrealistic option. (Paper courtesy of the excellent blog Econbrowser, from two other economists, James D. Hamilton and Menzie Chinn, who add their own thoughts on the debate.)

Perhaps both sides should agree to rally around the powerfully-argued case for higher gasoline taxes made by Greg Mankiw, who is among other things a former chairman of the council of economic advisers for George W Bush.

What is going to keep US petrol prices - already at record levels - high in the future? Ethanol, according to oil industry pundits quoted in the New York Times. It is an elegant argument: targets to replace petroleum-based road fuels with biofuels cast doubt on the future profitability of oil refineries, which deters new investment, which keeps capacity tight and refining margins high. So if you think you are paying too much for your petrol in future, blame the environmenatlists and the farmers and the Bush administration, and every other supporter of ethanol, but not Big Oil.

It is a provocative thesis, which has attracted comment both negative and positive. But while ethanol may be part of the picture, it is far from being the only deterrent to investment in US refineries. Consumer journalist Christopher Platt suggests such investment just hasn’t been popular with shareholders. And there are plans for new investment by Marathon, for example, (full story requires subscription).

The clincher, though, is that refining margins are simply not the most important determinant of petrol prices: that is the price of crude, as this analysis at the Oil Drum blog makes clear. Other things being equal, the more biofuels the US can use to replace petroleum products, the lower the price of crude will be.

Oil prices are being driven higher by a general dip in US petrol supplies, as Ed Crooks wrote yesterday. This is one of those counter-intuitive abnormalities that makes energy fun or frustrating, depending on your disposition. But it’s true, even though you may be hesitant to believe Abdalla Salem El-Badri, Opec’s secretary-general, because he has reason to want to downplay any blame attributable to the cartel, which has recently restricted its oil output to push prices up. See the AP story here. Instead, believe US refiners who are privately admitting to having trouble performing their regular scheduled maintenance on time, and for that matter on budget.

What is interesting is the reason: The general lack of parts and labour in a market of high demand that is making it more difficult to do everything from drilling new wells to retooling refineries. Now if only someone would come up with a better explanation than ‘psychology’ as to why refining less crude into petrol should drive crude prices up, rather than down. If you do, please do send us a comment…

US crude oil and petrol (gasoline) stocks rose more than expected last week, according to the latest weekly figures from the US Energy Information Administration. At R-Squared Energy blog, Robert Rapier suggests the increase may not be enough to prevent the US going into Memorial Day with record low inventory levels. As Adam Robinson of Lehman brothers put it in his note released immediately after the figures: "gasoline finally builds east of the Rockies, but stubborn demand limits stock increase." The EIA’s conclusion:  "With gasoline inventories likely to remain low all summer, retail prices are expected to remain close to $3 per gallon during the entire summer season. Prices could rise again towards the end of summer if demand surges, as it often does, in late July and August." And if there is any further disruption to supplies, prices could go higher still.

UPDATE: For a characteristically hard-hitting view of what the summer might hold for US drivers, check out Matthew Simmons, author of "Twilight in the Desert", here.

Chevron, the US’s second largest energy group, is close to admitting it should have known kickbacks were being paid to Saddam Hussein, during Iraq’s oil-for-food programme with the United Nations, Claudio Gatti of Il Sole 24 Ore, the Italian newspaper, reports. For an English version, picked up by the New York Times, go here. Chevron will pay $25m-30m in fines, about how much it earned in half a day’s work last year. But if the settlement with US attorneys goes ahead, it sets a precedent for other major oil companies, almost all of which, were accused in a report by Paul Volcker, former chairman of the Federal Reserves, of having bought Iraqi oil through middlemen who paid kickbacks on their behalf.

Petrol pump prices in the US have hit a record average of $3.07, up 20c from two weeks earlier and 4c higher than the previous record reached in Aug 2006, the Associated Press reports, quoting analyst Trilby Lundberg. That may still be cheap compared to the $7.18 an average gallon of UK petrol cost last week, but it is again getting US politicians worked up about greedy price-gouging oil companies, with a Senate bill in the works. The real cause of the jump is of course far more complicated, with low inventories and refinery shutdowns the main culprits. But as prices on the futures markets fall, so analysts say will costs at the pump. What will likely remain unchanged is that a bottle of spring water available at the kiosk of most US petrol stations will still cost substantially more than the petrol that quenches the thirst of the cars parked at the pump. And on many days the water bottle is the one that also comes with the better proft margin.

Where the oil and gas industry ventures, controversy follows. The Helena (Montana) Independent Record reports from Billings that the rush to drill in Wyoming, Utah, Colorado, New Mexico and Montana is pushing hunters and their game off federal land. The Environmental Working Group and the National Wildlife Federation found that drilling has doubled in the past decade and is destroying crucial habitat for species including pronghorn antelope, mule deer, elk and sage grouse. The fact that hunter and game appear to be ganging up on drillers may seem ironic, but it is also an example of one of the biggest hurdles to US energy policy: Nimby - Not in My Back Yard. Whether it is a famous liberal Senator blocking windmills off Cape Cod or Malibu celebrities grumbling about a new Liquefied Natural Gas Receiving terminal potentially spoiling their surfing, Nimby is everywhere. Why else was ethanol the cornerstone of George W. Bush’s most recent State of the Union address? It’s not much more environmentally friendly than petrol, it’s hardly cost effective and in terms of sheer scale, close to unachievable. But it does come with one crucial element - farm belt votes.

Repsol is still the company to hold the unfortunate distinction of having paid the most generous price for a recent Gulf of Mexico asset, with its 2005 deal to buy BP’s Shenzi field. Tom Ellacott, analyst for Wood Mackenzie, who crunched the numbers for today’s Eni deal, came up with an implied long-term oil price of $42 a barrel, less than half of the price Repsol assumed, according to Wood Mackenzie. In fact, Mr Ellacott said Eni’s generosity was in line with recent deals and understandable given the amount of current interest in assets located in Gulf of Mexico. In contrast to Venezuela, where Mr Chavez is riding rough-shot over his foreign investors, the US is one of the dwindling number of places oil companies can be reasonably sure they won’t get strong-armed for a substantially bigger slice of profits and control by the government. Not even the UK can make that kind of boast.

The US Gulf of Mexico appears in significant demand. Following on from this morning’s news of new leases, Eni this morning paid a macho price of $4.757bn for Dominion Resources’s assets there. Read the FT story here. Citigroup in a note this morning valued the assets at only $3.9bn. Analysts at Wood Mackenzie, the Edinburgh-based industry consultanting firm, are still crunching their numbers, but hint their valuation for the Gulf of Mexico fields Eni is buying had also been significantly lower. In terms of implied oil price, the one to beat is Repsol’s acquisition of BP’s Shenzi field. The Spanish energy group last July assumed a whopping $97 oil price to make it work, barring significant new reserve discoveries. Eni’s disappointing production results are not as desperate as Repsol’s problems, but it will be interesting to see what the numbers reveal later today. Judging from the field’s names: Devil’s Tower, Goldfinger, Spiderman, Q and Thunderhawk among others Eni’s Dominion deal is quite a macho affair.

As the summer draws nearer it’s not just school children who are rejoicing. The Houston Chronicle reports that today Washington plans to announce a new round of oil and gas leases in the Gulf of Mexico, and off the shores of Virginia and Alaska. Oil companies produce more than 1.6m barrels of oil a day and 4,000bn cubic feet of natural gas a year from federal waters. The government hopes to increase that by offering new plots, which had previously been off limits, over the next five years in order to stem the country’s growing dependence on foreign supplies. But summer also brings with it the threat of hurricanes and this season is expected to be fiercer than the last. Having learned its bitter lesson during hurricanes Dennis, Katrina and Rita in the past three years, the industry is bracing itself by trying to find better ways to secure its rigs, some of which are worth upwards of $1bn, the Chronicle also reports.