Refiners urge lawmakers to stop blaming industry for high prices

Washington (Platts)--3May2006

Politicians need to stop blaming the oil industry, and accept that it is
strong economic growth in the US and abroad that is causing high gasoline and
crude oil prices, National Petrochemical and Refining Association President
Bob Slaughter told reporters Wednesday.

"They need to stop scapegoating on the issue when the [real reason behind
high prices] is economic growth, nothing else," Slaughter said at a press
briefing in Washington.

He blasted a Congressional proposal, currently being debated on the House
floor, to implement anti-price gouging provisions, saying the term was
"difficult to define" and such a move could "shade over to price controls,"
which could cause spot product shortages and long lines at the gas pump.

While he would not forecast prices, Slaughter said that refineries still
out of service from last year's hurricanes should be coming back to full
capacity in coming weeks, which should help offset the growing summertime
gasoline demand, which is projected to be up 1.5% from last year.

Slaughter said the refining industry was "working feverishly" to comply
with the "very challenging" ultra low sulfur diesel program, which goes into
effect in June, and requires that 80% of onroad diesel meet a 15 part per
million sulfur standards at the retail level. There is nothing more that the
US Environmental Protection Agency should or can do to make the transition any
easier, Slaughter said. The agency, at the request of industry, has already
extended an original deadline and expanded the testing tolerance of the
product.

"At this point, there needs to be close consultation between industry and
the EPA as the deadline approaches," but further changes so close to the
implementation deadline could actually be detrimental, he said.

Slaughter said there had been "some discussion" between industry and
Congress last year ahead of the passage of the energy bill about the phase-out
of gasoline additive MTBE, but that he was not sure that "those concerns
reached the right people at the right time."

The May 5 elimination of the oxygenate content requirement from the Clean
Air Act -- which removes the need for refiners to use an oxygenate, like MTBE
or ethanol, in clean burning reformulated gasoline -- is being blamed by many
for the recent spike in gasoline prices, which on a nationwide average are
just shy of $3.00/gal, according to the Energy Department.

Refiners said without the Congressionally mandated oxygenated
requirement, they would not blend MTBE into gasoline, fearing product
liability lawsuits. MTBE, a suspected carcinogen, has been found to have
contaminated groundwater. The subsequent switch from MTBE to ethanol in
gasoline supplies ahead of the May 5 deadline resulted in shortages in some
RFG areas, like Virginia and the Dallas area, and helped drive prices higher.

The possible effects of the elimination of the rule in the middle of the
run-up to the driving season "received insufficient attention" from Congress,
Slaughter said, adding, however, that "a lot of other things were going on at
the time."

Slaughter called "positive" some of the proposals Congress has made to
address energy issues, including streamlining refinery expansion permits and
providing more access to public lands including Alaska's Arctic National
Wildlife Refuge, but he noted those would be long-term solutions.

"It is difficult to say whether anything his going to bring down prices
in the near term," he said.

--Cathy Landry, cathy_landry@platts.com

For more information, take a trial to Platts Oilgram News at
http://oilgramnews.platts.com.


 

Copyright © 2005 - Platts

Please visit:  www.platts.com

Their coverage of energy matters is extensive!!.