By Chris Baltimore WASHINGTON, May 27 (Reuters) - Refining experts are divided over whether the Bush administration could ease
record pump prices by lifting environmental regulations for cleaner-burning
gasoline in California and New York, both Democratic strongholds. The
administration is mum about whether it will
For years, the Environmental Protection Agency has mulled requests from California and New York to be exempt from federal rules that require them to sell gasoline treated with ethanol or other treatments to raise oxygen content. The EPA has refused to say how soon it will act on the requests. Higher oxygen content makes gasoline burn more cleanly, an important factor in densely populated areas.
"If you wanted to add immediate flexibility for refiners, you could eliminate the oxygenate requirement," said Bob Slaughter, president of the National Petrochemical and Refiners Association. "That's something that can be done today." Some refiners are pursuing other remedies. Top U.S. independent refiner Valero Energy Corp. has asked the Energy Department to stop putting crude oil into the nation's strategic stockpile to boost available supply. Granting the waivers would give refiners extra flexibility to meet short-term squeezes by shifting supplies between regions, refining officials said.
But experts are divided over the price impacts, and a government analyst said the action would have little effect. "I don't think it will help bring down retail gasoline prices this summer," said Jacob Bournazian, an analyst at the Energy Department's statistical arm. Granting the waivers will ease supply conditions somewhat, Bournazian said, but the Energy Information Administration has not studied the issue.
POLITICAL MOTIVES? The fact that New York and California both voted against President George W. Bush in the 2000 presidential election could influence the administration's thinking on the waivers, industry watchers say.
A federal mandate to burn oxygenates made from corn-blended ethanol are a boost to Midwest farm states, which could be crucial to Bush's November re-election effort, sources said. "The administration appears a lot more interested in keeping ethanol-producing battleground states like Iowa and Ohio happy than in doing the right thing here," said Frank O'Donnell at the Clean Air Trust. The Renewable Fuels Association, which represents ethanol makers like Archer Daniels Midland Co. , has lobbied hard against the waivers. California will use 1 billion gallons of ethanol this year, making it the nation's top consumer.
Other industry experts are skeptical that prices would fall substantially this summer if oxygenate rules were waived because U.S. refiners have already contracted for gasoline blending components. "I'm not sure that if (requirements) were to be waived right now it would do much good," because industry pipelines have already booked space for summer shipments, said Philip Verleger, an energy consultant in Newport Beach, California.