The California Air Resources Board (CARB) has voiced continued support for the state's cleaner burning gasoline but left open the door to changes in the program if fuel shortages occur.
CARB voiced its stance late last month after oil industry spokesmen declared that California's standards for reformulated gasoline, more stringent than federal standards, are not a major cause of recent increases in gasoline prices. The declarations occurred at a hearing at which officials of the California Energy Commission (CEC) and others appeared.
"The considerable amount of testimony at this hearing indicates that cleaner burning gasoline is doing just what we asked-removing 300 tons/day of pollutants from our skies at only a modest cost to California motorists," said CARB Chairman John D. Dunlap.
He nevertheless decried the state's gasoline price hikes. U.S. independent marketers also have voiced dismay at their squeeze on profits (OGJ, Apr. 22, p. 28).
"Californians are paying an extra 5-8/gal for cleaner, healthier air," Dunlap said.
"The rest of these outrageous price hikes reflect events within the state, national, and global oil markets that are unrelated to California regulations. After listening to the oil industry's testimony, I still have not heard anything that fully explains these price increases."
Rule suspension?
CARB told its staff to work with CEC to determine whether a temporary suspension of California gasoline standards would produce lower fuel prices and ease supply constraints. The board also authorized the CARB executive officer to temporarily ease regulations if he and CEC find that such action would be effective.
"We are willing to modify our fuel regulations if it would truly help ensure that Californians have adequate fuel supplies at reasonable prices," Dunlap said.
"But it would be a travesty if the industry's short term focus on profits jeopardized a program that is already removing toxins and hazardous pollutants from our air and making California a healthier place."
If necessary, CARB could allow temporary imports of gasoline not meeting all of its requirements but still meeting federal clean fuel specifications, Dunlap said. CARB's staff will determine environmental and economic effects that any variance or suspension of California fuel regulations might have in the state.
Crude oil prices
Executives of the 10 major oil companies doing business in California testified that sharp rises in crude oil prices are mainly responsible for the rapid increase in gasoline prices throughout the U.S.
Industry pointed out that crude oil prices have risen 50%, or 20/gal of gasoline, this year because:
- Iraqi crude oil did not appear on the world market this spring as expected.
- An unusually cold winter in much of the U.S. sparked demand for heating oil.
Oil spokesmen also blamed increased demand for gasoline that typically occurs in the spring, as well as operating problems at several California refineries.
For example, damage from an Apr. 1 fire at Shell Oil Products Co.'s 143,500 b/cd Martinez, Calif., refinery tightened fuel supplies in California. But the problem was to be solved shortly when Shell resumed production and shipments of cleaner burning gasoline arrive from outside California. The refinery produces about 10% of the gasoline used in California, No. 1 in U.S. gasoline consumption.
Introduction of cleaner-burning gasoline, which costs slightly more per gallon to make than traditional gasoline, also was cited as a reason for price increases.
High crude-oil prices also pushed up diesel prices throughout the nation, oil spokesmen said. Diesel prices rose sharply in late March following equipment problems at ARCO's 237,000 b/d Carson refinery, but California diesel production is now above normal.
Prices have remained high because of heavy diesel use by farmers during the spring planting season, oil executives said.
CARB rules required California refineries to produce cleaner burning gasoline by Mar. 1. All refineries met the deadline, and the new fuel is used throughout California.
While retail service stations are not required to sell cleaner burning gasoline until June 1, nearly all California service stations have been selling it since mid-March.
CARB said the new gasoline, which contains lower levels of toxics and other pollutants, reduces smog-forming emissions from motor vehicles by 15% and cuts cancer risk from exposure to gasoline toxics 30-40%.
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
