An unseasonal but temporary increase in the price of gasoline has captured the attention of news media in the US, but regulations under development that could boost the price permanently have escaped notice.
The mid-winter price rise for gasoline is unusual but not unprecedented. It occurred because the price of crude oil has increased by about $10/bbl since mid-December. And that happened because of optimism about the global economy and worry about unrest in North Africa and Iran.
Without those upward influences, crude prices would be lower. The market has plenty of oil.
What Americans should be hearing more about is imminent regulation that would raise the cost of making gasoline—and, by association, the price of buying it.
The hyperactive Environmental Protection Agency has sent the Office of Management and Budget its "Tier 3" regulation for final review. In this program, EPA proposes to toughen standards for gasoline volatility and sulfur content. It hopes to publish a final rule in March.
The Tier 3 initiative, motivated by a presidential memorandum in 2010 and an "antibacksliding" measure in the Energy Independence and Security Act of 2007, follows a dangerous assumption: that if some environmental regulation is good, more must be better.
Tier 3 mostly addresses ground-level ozone, an air pollutant that has plummeted nationwide but remains a problem in large, sunny cities. In those areas, Tier 3 standards will have marginal effect.
In fact, says the American Petroleum Institute, the fully implemented standards would boost emissions of a different type, greenhouse gases, by increasing energy consumption in refining.
And the costs? By API's reckoning, the new standards will raise the cost of making gasoline by 25¢/gal if EPA keeps the proposed volatility cut in the final rule or by as much as 9¢/gal if it only addresses sulfur.
Those are large prospective costs for environmental benefits quite likely to be very small.
More environmental regulation is, in fact, not always good. Increasingly, it's just more expensive.
