NCPA - National Center for Policy Analysis

Scapegoating High Gasoline Prices

June 14, 2000

In a panic, the Environmental Protection Agency is looking everywhere but in its own backyard for the reason gasoline prices have jumped dramatically, say critics. It is not a coincidence, they say, that new EPA requirements for cleaner-burning gasoline took effect on June 1 and that gas prices increased across the country in the past few weeks, with the highest price spikes occurring in the Midwest.

  • As of Friday, the average price of regular self-serve gasoline in Chicago was $2.13 a gallon -- up from $1.37 a gallon in January.
  • The new "reformulated" gasoline costs more to refine -- 5 to 8 cents a gallon more by EPA calculations.
  • But Ben Lieberman of the Competitive Enterprise Institute says the figure is more like 30 to 40 cents more in the Midwest, because of a thin infrastructure and the difficulties of blending in the oxygenate ethanol.
  • Supplies are so tight in the Midwest that, according to the American Petroleum Institute, some refineries are carting in the fuel they need by barge from Nova Scotia or the Gulf states.

Refiners have to rely on ethanol to make their gasoline comply with the federal regulations. But ethanol evaporates quickly, which makes production more difficult. Meanwhile, EPA officials put the blame on oil companies, saying they have offered "no good explanations" for the price spikes. The agency then hints at price gouging and collusion.

Sources: Editorial, "High Gas Prices? Blame EPA," Investor's Business Daily; and Pam Belluck, "In Gas Prices, Misery and Mystery," New York Times; both articles on June 14, 2000.

 

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