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Posted on 06/14/2002 6:27:17 PM PDT by kattracks
Californians could face pump prices of $3 a gallon, thanks to the phaseout of MTBE gas additives.
According to the Contra Costa Times, the conversion from MTBE to ethanol additives in California's gasoline raises the specter of skyrocketing pump prices next year.
Gov. Gray Davis, facing a tough challenge from Republican Bill Simon in this year's gubernatorial contest, tried to fend off any possible gasoline price increases by allowing oil companies to continue to use MTBE until 2004.
As NewsMax.com reported on April 18, the delay, according to Davis, would buy time for construction of transportation and fuel-blending facilities needed to replace MTBE with ethanol, produced mostly from corn grown in the Midwest. He said he feared disruption in ethanol supplies would cause long lines and price spikes at gas stations.
But oil companies anxious to get the conversion process over and done with are pushing to phase out MTBE well ahead of schedule because of legal concerns, even though it will drastically reduce the volume of gasoline available from state refineries.
And despite Davis' assurances that Californians have no reason to worry, oil company officials, wary of violating antitrust laws, refuse to estimate where pump prices might go as a result of the switch.
According to an oil industry consultant whose warnings caused Davis to extend the phaseout date three months ago, prices could jump next spring to between $2.25 and $3 a gallon.
"There will be a significant increase in gasoline prices," David J. Hackett told the Times. Hackett is a consultant with the firm that reported in February that replacing MTBE with ethanol would put a severe dent in the state's gasoline supply.
"I hope I'm wrong," Hackett added.
As NewsMax.com reported in April, the federal Clean Air Act mandates that areas not meeting air quality standards must use MTBE or ethanol to reduce vehicle pollution. In California, the refiners chose MTBE, which they can make from petroleum, instead of buying ethanol from the Midwest.
Gasoline containing MTBE provides up to 15 percent of the supply, and switching to ethanol additives will make up for hardly any of the lost supply, especially, as the Times points out, when summer gasoline formulas go into effect next February and March, according to a Stillwater Associates report issued last February.
But the Davis administration, which responded to Stillwater's conclusions by putting off by one year the MTBE phaseout, disputed Stillwater's estimates this time.
"If those companies can make the switch, which is obviously good for the California environment, without impacting the pump price, we say all the more power to them," William L. Rukeyser, assistant secretary of the California Environmental Protection Agency, told the Times.
"But we will be watching the retail price very closely. We hope that scenario is not correct," he added.
Shell Oil Co., BP and Phillips 66 are all planning to complete the phaseout by year's end. The three companies sell about 57 percent of all the gasoline consumed in California, according to State Board of Equalization figures, the Times reported.
If other oil companies follow their lead, pump prices will be affected. If the other two major refiners - Exxon Mobil and ChevronTexaco - also decide to convert to ethanol, the problems that Stillwater reported are more likely to surface.
"There's a high probability that they'll all go, but it's not 100 percent," Hackett said. "It's going to be interesting to watch."
There are now dozens of lawsuits around the country targeting oil industry companies for polluting groundwater, and a San Francisco jury recently found that several companies, including Shell, Texaco (which has since merged with Chevron) and Tosco, which is now part of Phillips, were liable for polluting Lake Tahoe.
Hackett said that among the reasons gasoline makers might want to switch to ethanol are the opportunity to avoid added exposure to environmental lawsuits, the reduction in the amount of additives they will have to handle and the opportunity to capitalize on higher prices.
"They look at the fact they're doing what the governor wanted, and guess what it's going to mean in terms of prices," Hackett said. "If the price goes from $1.50 to $3 or $2.25, who gets all that?"
Read more on this subject in related Hot Topics:
California Governor's Race
Ouch.
LVM
In terms of materials and conversion cost, probably so.
But costs don't seem to be the issue here. Instead, it is supply.
In its own charming way, the California bureaucracy is even more stunningly bureaucratic than the federal bureaucracy.
Not an honor most states would savor...
Been out most of the day!
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I am trying to remember why that is the case.
| Replace MTBE with GASOLINE! |
In California, the refiners chose MTBE...
| This is really cool HTML! |
COOL! Thanks for teaching an old Dawg a new trick!
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