The New Reason For Pain at the Pump

Tech Central Station ^ | 03/19/2004 | Ben Lieberman

[farmfriend]

The New Reason For Pain at the Pump

By Ben Lieberman

Everyone knows that the recent rise in the price of oil has had an effect at the pump, but something less well known is also affecting gasoline prices. It is something the federal government could reduce, since the federal government created it in the first place. It is gasoline regulations.

Until the mid-1990s, the feds did not micromanage the recipe for gasoline, the only exception being the phaseout of lead in the 1970s. But that changed with the 1990 amendments to the Clean Air Act, which began to take effect a few years later.

As a result of these provisions, we now have a bewildering variety of gasoline requirements. One third of the nation uses something called reformulated gasoline, designed -- very imperfectly as it turned out -- to deal with summer smog in the nation's most polluted metropolitan areas. We also have so-called oxygenated gas in several areas to combat high wintertime levels of carbon monoxide, a problem that was rapidly disappearing before the provisions even took effect. In addition, conventional gasoline is also subjected to a number of requirements, which can vary by geographic location and time of year.

Beyond the direct role of the federal government, several states have also come up with their own unique gasoline blends, often in order to obtain the required federal approval for their pollution-fighting plans.

Some of these measures have helped reduce vehicle emissions and improve air quality, while others have not. But all have succeeded in driving up the cost at the pump. In addition to the compliance costs of each regulation, the fact that we have gone from an efficient, fungible, national market in gasoline to a patchwork of regional, state, and local ones adds to the logistical costs in meeting the nation's fuel needs.

The impact of these regulations, some of which are still being phased in, has become especially noticeable in recent years. And during periods -- such as now -- when high oil prices boost prices, the total effect can be very punishing on working families.

The fact that gas in the more expensive cities (mostly in California) currently costs as much as 75 cents per gallon more than in the cheapest cities attests to the fact that there is more going on than an increase in the price of oil, which is the same everywhere. Not coincidentally, the most expensive cities also have the most onerous regulatory requirements. Nonetheless, when gas price spikes occur, the policy debate focuses on the cost of crude while the regulatory burden often gets ignored.

Gas usually gets pricier heading into the summer months, as demand picks up and even tougher regulations designed to fight smog take effect. Given today's starting point of $1.77, which is unusually high for March, this summer could prove to be very costly. Breaking the inflation adjusted record of $2.90 per gallon set in 1981 seems out of reach but is far from impossible.

Despite the specter of $50 summertime fill-ups just months before the fall elections, Washington has yet to do anything substantial to reduce the regulatory burden. This isn't so surprising given the focus on oil prices, which is something the feds can do little to change in the short term -- opening up ANWR and other US sites to drilling would help, but would take several years. Tapping the 600 million barrels of oil in the Strategic Petroleum Reserve (SPR) is a short term option, but the SPR was meant for national emergencies that disrupt oil supplies to the US. If used now simply to temporarily reduce today's high prices, it would not be available later until it is replenished.

Streamlining the regulations could do some good but is politically difficult, as the necessary changes to the Clean Air Act's gasoline requirements would spark loud environmentalist opposition. If anything, policymakers may be heading in the wrong direction. The proposed energy bill, currently stalled in Congress, is at best a mixed bag on gasoline. It would modestly streamline a few of the fuel regulations, but would also add new ones, in particular a mandate that ethanol be added to gasoline. According to the Department of Energy's Energy Information Administration, the energy bill may actually add up to three cents to the price per gallon once fully implemented.

But Washington's relative indifference may not last long. While comparable gas price spikes occurred in 2000, 2001, and 2003, none lasted more than two months. When prices went back down, so did the public outcry for Congress to do something about it. In contrast, if today's high prices persist well into the summer -- especially the summer of an election year -- we may finally see some serious efforts to tackle the federal red tape surrounding the nation's gas pumps.

Ben Lieberman recently wrote for TCS about "Clinton's Midnight Madness vs. The Bush Administration."

[farmfriend]

Rights, farms, environment ping.
Let me know if you wish to be added or removed from this list.
I don't get offended if you want to be removed.

[Cobra64]

DOE under Jimmah Carter started a lot of this. Typical liberal crap destroying free enterprise, economics and normal thinking. Democrats = cancer. Too bad they're not necrofiliacs. Calling Mr. Donner... Mr. Donner. Pick up white phone in the Donner Pass.

[supercat]

Can someone explain to me how oxygenated gasoline is supposed to reduce the emissions from a car with modern pollution-control equipment? Given that the catalytic convertor needs a certain amount of unburned fuel in the exhaust that feeds it, I can't see how oxygenated gas would reduce tailpipe emissions since the control system would have to 'undo' the effects of oxygenation to feed the cat.

I could understand requiring oxygenated gasoline for devices such as lawnmowers, chainsaws, portable generators, and other devices which lack emissions-control equipment. But its use in modern cars just makes no sense to me.

[Trailerpark Badass]

I've just recently noticed that many consumer items are selling at "record high prices." I wonder why the press only uses that particular phraseology for gasoline.

[farmfriend]

I wonder why the press only uses that particular phraseology for gasoline.

They are having to fill those SUV tanks they think are so evil but drive anyway.

[SpaceBar]

The real problem isn't so much the formulated gasoline blends required for regional markets, it's the fact that petroleum price speculation fixes the price at the pump to the spot price of crude today, not six months ago when it was pumped to the surface of the Jeddah oilfields and onto a waiting transport ship. The end consumer acts as the financial reservoir and buffer to absorb the negative prices that translate directly to profits on the sale of petroleum, and the highs that are hedged against by the futures market. All the while the price ratchets up at the pump. Always up, rarely down. And if it does go down, it's just transient noise in a larger upward trend. Who is to blame? OPEC, "big" oil companies, financial commodities traders, Joe who owns the Chevron franchise down the street? Us, for developing a taste for gasoline like it's liquid cocaine? Perhaps we are all culpable in a way.

[balrog666]

Everyone knows that the recent rise in the price of oil has had an effect at the pump, but something less well known is also affecting gasoline prices.

It's called inflation and the fall of the US dollar. If they weren't cooking the books over at the Federal Reserve, we'd all be running amuck and spending cash like it was the Weimar Rebublic Argentina Brazil Mexico Russia Indonesia the Great Depression all over again.

[marron]

Increased regulations have a disparate effect on smaller independents who have shallower pockets and are less able to withstand the costs required to keep up. The majors are better able to roll with the punches.

The problem for the consumer is that the independents, the mom-and-pops, are a part of what keeps the prices down. As they disappear, as they are driven under by tight margins, competition is squeezed out of the market and with it some of the spare capacity. As more and more of our eggs are in fewer and fewer baskets, the system becomes less able to withstand shocks; a refinery fire, a plant down for maintenance, becomes a greater shock to the system than previous, and you see it at the pump.

Whether a given round of regulations, a new government mandated formula, whatever, is a good thing or bad I have to leave to others to say. But anything that makes it more difficult for the independents to stay in the game, or more difficult for the independents to get into the game, only creates and preserves the monopoly of the majors and makes the system less shock absorbent.

You want a buyers market, and that means you want a variety of sellers, and lots of spare capacity in the system. That means you make it as easy as possible to build process plants, and you keep the regs to a reasonable minimum. Or alternatively, you watch the price jump every time the only refinery in your area burps.

[TheLion]

Here is what Chevron has to say:


"Oxygenated gasoline" is a mixture of conventional gasoline and one or more combustible liquids which contain oxygen ("oxygenates"). At present, the most common oxygenates are ethanol and MTBE (methyl tertiary-butyl ether). ETBE (ethyl tertiary-butyl ether) and TAME (tertiary-amyl methyl ether) have seen some use and their use may increase.

Why Oxygenated Gasoline?

The National Ambient Air Quality Standard (NAAQS) limits the maximum concentration of carbon monoxide in ambient air to nine parts per million (8 hour average). Thirty to forty metropolitan areas exceed this limit on some days, primarily during the winter months. The government classifies these areas as "carbon monoxide nonattainment areas."

Most of the excess carbon monoxide comes from gasoline vehicles. While exhaust from gasoline engines consists mostly of non-toxic gases (nitrogen, carbon dioxide and water), it contains some carbon monoxide. Older vehicles without catalytic convertors are the worst carbon monoxide emitters. Newer vehicles with a catalytic convertor in the exhaust system are much better because the convertor changes most of the carbon monoxide to carbon dioxide. But, these vehicles emit more carbon monoxide right after they are started than after they have warmed up; it takes a little time for the exhaust to heat the catalyst to the temperature at which it is most effective.

All owners can help reduce carbon monoxide emissions by properly maintain their cars. This is particularly true for older cars which lack a catalytic convertor to moderate the higher amounts of carbon monoxide produced by an out-of-adjustment engine. Proper maintenance includes keeping the carburetor or fuel injection system clean and properly adjusted and keeping the engine tuned. For newer cars, it also includes replacing the catalytic convertor when the catalyst is no longer sufficiently active.

Oxygenated gasoline also reduces carbon monoxide emissions. This is how it works: Engines emit more carbon monoxide when they are fed "rich" air/fuel mixtures -- mixtures containing more fuel than can be completely "burned" by the oxygen (from the air) in the mixture. Rich air/fuel mixtures are used during engine startup and warmup and at full throttle (for rapid acceleration). Oxygenated gasoline requires less oxygen (from the air) for complete burning than the same volume of conventional gasoline. Adding oxygenate is like adding more air. So, for the same carburetor or fuel injection setting, changing an engine's fuel from conventional gasoline to oxygenated gasoline produces a "less rich" air/fuel mixture and, therefore, one which generates less carbon monoxide when it burns. The carbon monoxide reduction obtained from oxygenated gasoline is much larger for older cars than for newer, well-maintained cars.

http://www.chevron.com/prodserv/fuels/bulletin/oxy-fuel/whwyoxy.shtml

[jwalsh07]

[farmfriend]

The media never lets the facts get in the way of a good story with a leftist ending.

[Torie]

You clearly don't live in California, your chartist you.

I'm mad as hell, and I am going to vote for Kerry, because he is going to lower my gasoline prices, which is going to offset by about 1%, if it all happens by magic, his proposed tax increase on me. The Iraqis and oppressed peoples everywhere can fend for themselves, absent UN interest, which means a few places, such as Haiti, assuming the leader is PC, but not many. I just hate paying so much at the pump. It is probably all a Halliburton plot engineered by Cheney, since he really runs the planet for the rich and powerful anyway. His total control of the US is just a hobby.

[jwalsh07]

Not bad, the Onion is looking for a few good pensmen.

Gas prices by state.

[jwalsh07]

O'Reilly was waxing poetic today about how gasoline prices were at their highest levels ever and going through the roof.

I was going to edumacate him and his no spin listeners but could not get through. I sent him the no spin stuff but it will never see the light of day, it doesn't accord with his "populism".

[supercat]

Here is what Chevron has to say:

I'd like to see some numbers that show what actual improvements in CO levels are realized by using oxygenated gasoline in cars which already have emissions-control equipment, and also some numbers to show how much fuel economy is lost. I doubt if Chevron minds a reduction in fuel economy, but as a car user I do.

[Torie]

In California, it is because we have a unique blend, mandated by law, and when the supplies get tight, the refineries find that it is a good time to shut down and make necessary repairs. The California gasoline market in a word is too friggin small to make it inconveniently economically difficult to partake of predatory practices.

[jwalsh07]

MTBE, yeah that was a fine idea by the environuts.

[Torie]

Atmospheric pollution issues are beyond my pay grade. Carry Okie might be the expert on it.

[edger]

Probably the dumbest thing in all the world is "ethanol" as a fuel for automobiles. More energy is consumed to make a gallon of ethanol than is gained from burning a gallon of ethanol. Only a Congress could or would require anything this stupid.

Ethanol might have made some sense in the 1980s before the advent of computerized fuel mixture control, but it is worthless in any automobile less than 15 or 20 years old.