Stalled At The Pump

Frank O'Donnell

September 22, 2005

Frank O'Donnell is president of  Clean Air Watch, a 501 (c) 3 non-partisan, non-profit organization aimed at educating the public about clean air and the need for an effective Clean Air Act.

In the days following Katrina, the U.S. EPA began issuing short-term waivers from typical clean-gasoline requirements in order to avert the prospect of gasoline shortages in such areas as Atlanta, Phoenix and Texas, which usually sell cleaner gasoline in the summer than is available in many other states.  

The EPA action appears to have been appropriate under the circumstances.  In fact, EPA has done this sort of thing many times in the past after natural disasters.

But the agency’s post-Katrina actions underscored a problem with our current gasoline standards: Right now, thanks in part to oil industry lobbying and propaganda, many different types of gasoline are used in different parts of the country.  In a June 2005 report, the Government Accountability Office noted there were at least 11 special gasoline blends, in addition to conventional gasoline, on the market last summer, each version with three grades: regular, mid-level and premium.  That’s at least 33 different fuels to power one type of engine.

As a result of this balkanized system, the public is paying more for gasoline than it should, while being exposed to more harmful pollutants than necessary. With oil prices holding above $60 and hurricanes increasing in severity, now is the time to consider a single national standard at the toughest possible level to provide the best protection for the breathing public while taking away some of the arguments of the oil industry and its political supporters.

This is tricky territory, because some are trying to use Katrina as an excuse to weaken existing clean-air requirements.  Specifically, Rep. Bob Ney, R-Ohio, (perhaps best known as fronting for accused scammer Jack Abramoff and his sidekick, Michael Scanlon—and later declaring he was their “innocent victim”) has introduced undesirable, post-Katrina legislation that would standardize most gasoline at the lowest common denominator. His bill would expose millions of Americans to higher levels of smog and toxic chemicals.

Even so, there is merit in trying to figure out if today’s labyrinth of different fuel formulations could be simplified while improving environmental protections. Though the current system was begun with good intentions, oil companies have exploited it to the max.

Some of the problems go back to changes in the Clean Air Act made in 1990.  At that time, Congress called for EPA to require cleaner-burning “reformulated” gasoline in designated high-pollution areas. The theory then was that it would be too costly to require cleaner gasoline everywhere.  (California, because it began tackling the pollution problem earlier, was permitted to have even cleaner-burning gasoline, which it still has today.)

Other states were also permitted to adopt the cleaner federal gasoline.  But when it came time for states to make decisions, oil companies objected, saying that “manufacturing costs could be very large.” (The Energy Department put this claim into context in 2003 when it reported that the cleaner-burning gas generally cost 2.5 to 4 cents a gallon more than regular. DOE found the cleanest California gas could range from 5-15 cents more than the regular sold elsewhere.) 

In a memo written in the early 1990s, the oil industry explicitly encouraged state governors to adopt different fuel formulations.  The memo argued that governors would be “fools” if they chose to use a standard government formula for cleaner fuel.  And many governors followed the industry suggestion.

These differing fuel blends—now derided by oil companies as “boutique fuels”—have probably helped reduce tailpipe emissions and improve air quality (though not as much as standard cleaner-burning fuel.)

But, as GAO noted, “the introduction of these blends appears also to have divided the gasoline market, converting what had been closer to a single national commodity market, into islands of smaller and more local markets for
blends of gasoline that are typically not interchangeable.” GAO added:

Overall, this transformation of the gasoline market has complicated the supply infrastructure, increased production and delivery costs, and reduced the availability of gasoline, in some cases. The impacts of the proliferation of special gasoline blends are most evident when there is a disruption in the supply chain, such as when a refinery or pipeline is shut down. In these instances, localities using a blend different from the gasoline used in nearby areas must seek replacement supplies from farther away, leading to delays that likely cause higher and longer price spikes until these supplies arrive. Overall, it is likely that gasoline prices are higher now than they would be if gasoline were closer to a single commodity. [emphasis added]

EPA has long promoted more consistent use of reformulated gasoline. The agency acknowledged in a 2001 “White Paper” that the current system had become too complicated.  But EPA noted it would require congressional action to make needed changes in the system.

Though the oil industry likes to inveigh against “boutique fuels,” it hasn’t been in a rush to change the status quo—usually because it can mark up costs during disruptions.  Industry has been particularly adamant in opposition to making California’s fuel the nation’s standard.

Ironically, as we have learned in recent years, there really is no such air that’s “too clean.”  EPA assessments of toxic chemicals have shown that millions of people in allegedly “clean” areas may be exposed to unnecessarily high levels of some carcinogens such as benzene that waft from gasoline tailpipes.  There’s a strong argument to be made that we should be standardizing gasoline at the cleanest possible level.

In the recent energy bill, Congress limited the expansion of new special blends and asked the administration to study the issue further.

We can only hope that will be a thoughtful examination at ways to improve the situation—and that Congress doesn’t rush to endorse a Bob Ney-style approach that would be simpler, but much more toxic.