Clean Air Act Increases Fuel Prices

April 16, 2012

Introduced in 1990, the Clean Air Act (CAA) created minimum standards for gasoline throughout the country that stimulated demand for boutique fuels.  The stated purpose was to reduce emissions of dangerous chemicals.  Yet while the CAA may originally have been successful in this regard, the law seems now to be doing more harm than good, says Steven F. Hayward, the F. K. Weyerhaeuser fellow at the American Enterprise Institute.

First, creating an artificial role for ethanol additives and the creation of boutique gasoline across the states causes significant complications because individual states created their own specialized standards.

  • The Government Accountability Office estimates that there are between 45 and 70 different kinds of gasoline used across the United States.
  • Not surprisingly, 34 states use some variant of this specially blended gasoline, usually during the summer, which is one reason gasoline prices always rise during the "driving season."
  • This creates complications in localities that cross state lines, such as St. Louis, which is currently saddled with the strictly controlled use of three different kinds of gasoline.

Second, the law has proven costly for consumers who are already facing higher prices at the pump.

  • By allowing for the creation of so many different fuel standards, the CAA arbitrarily segmented the market, thereby undermining domestic competition among refiners.
  • This allows refiners to charge higher prices for specialized fuels.
  • Furthermore, the specificities of the gasoline cocktails have the effect of eliminating gasoline imports, contributing to gasoline price volatility and adding further pressure to raise prices.
  • It is estimated that the price premium from these two effects is in the neighborhood of 10 to 15 cents per gallon -- a substantial cost when prices are already high.

Third and finally, the regulations created by the Clean Air Act are outdated and ineffectual.  While the aforementioned costs might be justified if it were found that the law were actually contributing to cleaner air, the absence of data to support this claim undermines the CAA's original mandate.

Source: Steven F. Hayward, "Bureaucratic Gas," Weekly Standard, April 2, 2012.

For text:

http://www.weeklystandard.com/articles/bureaucratic-gas_634424.html

 

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