It's not only at the pumps that you can calculate the impact of rising oil prices. You can see it in the softening of durable goods orders, the decline in consumer confidence, and the steep drop in President Bush's poll numbers. And soon enough, you'll be able to see it big-time in profits not only of the major oil companies, but the up-and-comers of the refining business -- companies such as Valero Energy Corp., Tesoro Petroleum Corp. and Premcor Inc. -- that have cobbled together networks from the discards of the majors.

Not surprisingly, there were familiar accusations of gasoline price gouging last week. Only this time they came not just from consumer advocates. A study by economists at the General Accounting Office found that recent mergers in marketing and refining had sufficiently reduced competition to add a penny or two to the prices at the pumps. Industry spokesmen and the antitrust regulators at the Federal Trade Commission immediately dismissed the study as faulty.

Nonetheless, two factors cited by the GAO went largely unchallenged. There is no denying that a decade of mergers and asset swaps has resulted in a concentrated industry, leaving few of the pesky independents willing to start price wars in an effort to gain extra market share. Instead, the industry seems to have settled into a more cozy kind of competition in which a major player in each market takes the lead in raising and lowering pump prices in response to changes in spot prices, with everyone else following.

Of even greater impact has been the reluctance of the industry to invest in additional refining capacity, both because margins have been low and getting permission to build new facilities has proved so difficult. As a result, while demand for gasoline has risen 27 percent since 1977, the government calculates that refining capacity has grown by a measly 2.4 percent, giving refiners greater leverage to raise prices whenever supplies are short.

That said, the 40 percent increase in crude oil prices in the past year explains most of the price increases at the pump. Saudi Arabia is pushing a plan for OPEC to drop all production quotas for the time being, which would affect market psychology more than actual supply, because most producing countries are already pumping all the oil they can. But to win approval from more hard-line countries, the Saudis may have to agree to increase the cartel's target price for a barrel of crude from $25 to something closer to $32. The higher target is meant to reflect not only the higher level of demand for oil but the declining value of the currency in which it is priced -- the U.S. dollar.