Reports today give an explanation for the escalation of the price of gas at the pump.

Consumption of gas worldwide and in the U.S. in particular is down fairly significantly. But investors worldwide have increased their investment allocations to commodities, particularly crude oil, even more dramatically. The effect is that even with reduced demand for the end product, demand for the raw material is up sufficiently to cause pretty significant gas price increases.

The trend towards reduced consumption is almost certain to continue. We may not like the involvement of the government in the car business, but part of the pre-bankruptcy agreements had to do with what vehicles GM and Chrysler would be required to produce. The "fleet mileage" of future cars from those companies will be dramatically higher, even without the significantly increased CAFE standards. Ford is already well along in the design and introduction of its new fleet of cars and trucks. Reportedly, Ford will have no difficulty meeting the 40 percent increase in the U.S. fuel-economy standard to 35 miles per gallon by 2020. The same will probably be true for GM and Chrysler.

Reduced consumption of gas is a fundamental element of the energy independence plan. But few anticipated that the financial markets would react in a way to more than offset the reduced demand for gasoline.