- The Washington Times - Sunday, July 2, 2000

The oil industry is worried and you should be, too. According to sources within the industry, the recent uptick in gasoline prices is not a temporary fluctuation. It is, rather, an omen of things to come. Fuel is becoming more expensive and will become more so in the future in part because of myriad federal requirements relating to "clean" gasolines. These are known in industry argot as "reformulated" gasolines, or RFG.

It's not just that RFG fuels are more costly to refine (they are), but also that regulations as to the specific formulation and content of RFGs differ from area to area with the result being that the oil companies must produce different types of fuels for different areas. For example, all motor fuels sold in the state of California differ from the motor fuels sold in the rest of the United States. Likewise, the composition of diesel fuel varies from area to area with new "low sulfur" mandates apt to add to the confusion.

What all of this means is that it is no longer possible for refiners to produce a single basic kind of gasoline that can be piped all over the country. Instead, gasoline must be refined in several "batches," with one type going to one area and another to a different area. Fuel cannot be mixed or shipped via the same pipelines. When unanticipated demand creates a shortfall, as has been happening in the Midwest, it is no longer an easy matter to simply pump more fuel to the affected area. Prices rise and shortages are the result. The economies of scale that helped keep American gasoline prices among the lowest in the industrialized world are being negated by federal environmental regulations requirements that are about to increase vastly in scope and complexity.

Last week, the National Petroleum Council released a study about U.S. refining that had been requested by the Department of Energy. The gist of the study is that proposed and pending federal requirements for the future content of both gasoline and diesel motor fuels will engender more severe local shortages and price volatility. Most of the pending requirements having to do with low-sulfur gasolines and diesel fuels as well as the incorporation into motor fuels of the corn-based "oxygenate" ethanol, will go into effect during the next six years a time frame the NPC suggests is likely to herald the end of the era of affordable energy.

Bill Clinton will no longer be in office then, but the legacy of his administration's environmental policies will be felt by all of us each time we pull up to the pump.

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