EPA’s Gas Price Contribution
Last December, when the Environmental Protection Agency announced a tough new standard for sulfur content in gasoline, few seemed concerned that the supposedly cleaner-burning fuel would cost a bit more. After all, with President Clinton claiming the new rule would dramatically improve air quality, why quibble about an extra 2 to 6 cents per gallon?
However, this rule is only the latest of many regulations under the Clean Air Act that have had a substantial cumulative effect on fuel prices, but have frequently failed to deliver the promised environmental benefits. Given the recent public outcry over the OPEC-generated price increases, perhaps it is time to review some of the mistakes our own government has made that have exacerbated the gas affordability problem.
Take the fuel additive MTBE, which EPA requires in gasoline sold in those areas of the country with the highest levels of ozone, the primary constituent of smog. According to the U.S. Energy Information Administration, this putative smog-fighting compound adds 2.5 cents to 4 cents per gallon to the price at the pump. Despite the costs, a 1999 National Academy of Sciences study concluded that the use of MTBE “has little impact on improving ozone air quality and has some disadvantages.” Worse yet, MTBE has leaked into water supplies throughout the country, sparking a backlash against its use. Last month, EPA announced belated steps to phase out MTBE based on water contamination concerns. Unfortunately, the agency now wants to replace it with ethanol, which costs even more and has an equally dubious environmental record.
Beyond tinkering with the composition of gasoline, several EPA rules have raised prices in less direct ways. For example, EPA’s aggressive enforcement of its New Source Review program has made it extremely difficult to build new refineries, or even upgrade existing ones. Refining bottlenecks in California have already added to the cost of gas in that state, and the problem may spread to other parts of the country in the next few years.
Many other rules are in the works. EPA soon will release a new standard for sulfur in diesel fuel, estimated by some refiners to cost an extra 5 cents per gallon. The agency also is working on new benzene limits for gasoline. Indeed, if the past is any guide, the flow of major new fuel regulations will continue at the rate of at least one or two per year. Individually, none of these measures will break the bank, but the net effect is considerable, especially for the working poor.
Unlike the costs, the benefits of EPA-managed fuel supplies are unclear. Granted, air quality has markedly improved over the past three decades, due in substantial part to dramatic reductions in motor vehicle emissions. But the lions’ share of the credit goes to improvements in the vehicles themselves, and not to the federally mandated changes in the makeup of fuels.
There is only so much our government can do to influence the actions of OPEC or any other factor that affects world oil prices. But by subjecting EPA’s fuel regulations to more rigorous scrutiny, and rejecting those that do more economic harm than environmental good, we can continue protecting the quality of the air we breathe while making future trips to the pumps considerably less painful.