US energy bill wouldn't lower gasoline prices

Bob Tippee

"Folks," Speaker Dennis Hastert (R-Ill.) said after the US House of Representatives passed comprehensive energy legislation Apr. 21, "it's about gas prices, gas prices, gas prices."

Well, that's malarkey, malarkey, malarkey.

It wasn't about "gas prices, gas prices, gas prices" when the House first drafted then passed basically the same energy bill in 2001-02. Gasoline then was cheap and therefore ineffective as a political lever.

Now, of course, expensive gasoline captures public attention. Lawmakers naturally try to harness the concern in service to energy legislation the White House wants them to pass despite past failures.

They shouldn't promise more than their bill can deliver.

It's true that pieces of the far-flung legislation might increase crude oil supply and encourage refinery expansion, which would tend to moderate gasoline prices. And a controversial provision would let refiners concentrate on making fuel instead of defending their bank accounts against opportunistic lawsuits. The legislation has its merits.

Overall, however, it would more likely increase than lower gasoline prices. Here's why: It would ban methyl tertiary butyl ether and require ethanol in reformulated gasoline. That combination would suppress supply and raise costs of bringing gasoline to market.

Ethanol can't extend supply to anywhere near the extent its supporters claim—if at all. It blends at lower volumes than the MTBE it displaces, requires rejection of light ends from blendstocks during summer, uses considerable amounts of energy in production, and contains less energy than gasoline.

It requires special handling and, because of high production costs, wouldn't be a fuel additive without a generous tax credit. Also, largely because of evaporative emissions, replacing MTBE with ethanol in reformulated gasoline aggravates ozone pollution in some areas and lifts prospects for more costly regulation.

Lawmakers serious about prices would not require ethanol in gasoline. Farm-state lawmakers, however, won't support an energy bill that lacks an ethanol mandate.

To many segments of the oil and gas industry, beneficial pieces of the energy bill justify a trade-off on ethanol.

But no one in the industry should join lawmakers in implying the bill would lower gasoline prices. It isn't so.

(Author's e-mail: bobt@ogjonline.com)

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