Why Gas Prices May Go Up, and Who Deserves the Blame
Ben Lieberman at TCS Daily has the news:
2005 was a very expensive year for gasoline. And thanks to Washington, 2006 could be even worse.
The feds did not waste any time, with two costly gasoline requirements having taken effect on January 1st. That’s right. The year has already begun with two new regulations that will raise the price at the pump.
The first is the new ethanol mandate — part of the massive energy bill passed last August. Under the new law, 4 billion gallons of this corn-derived fuel additive will have to be included in the nation’s gasoline supply throughout 2006.
Ethanol costs more than gasoline (if it didn’t, its producers would not need federal help) — and its use reduces fuel economy. The new mandate is great news for some well-connected special interests, namely Midwestern corn farmers and big ethanol producers like Archer Daniels Midland (ADM). But those who are stuck paying the tab — you — will be far less thrilled.
The second regulatory price boost will come as a result of the latest round of sulfur reductions from gasoline, pursuant to a costly Clinton-era regulation. Similar low-sulfur rules applicable to diesel fuel also take effect in 2006 and will have an even bigger impact on diesel costs.
While Washington is doing things that will hurt consumers, it isn’t doing much to help them. These new gasoline regulations would not be so hard to take if EPA regulators or Congress used the occasion to clear away several of the old ones that also add to fuel prices. The energy bill does contain some modest streamlining measures, but overall, 2006 will bring more regulatory additions than subtractions.
Over the past ten years, the EPA has imposed a bewildering variety of fuel requirements, with as many as 18 so-called boutique fuels in use at any given time. The cost and complexity of this scheme goes well beyond any rational clean air justification. Granted, air quality has been improving, but it was doing so just as quickly before these newfangled fuel requirements were imposed.
The new ethanol and sulfur rules may each add several cents to the price per gallon — bad enough, but it’s the cumulative burden of all these federal regulations that is even more substantial.
The fuel regulations will continue to grow after 2006. For example, EPA is required, pursuant to a settlement of a lawsuit brought by an environmental group, to propose another round of regulations limiting the amount of benzene and similar trace components from gasoline. The regulation must be proposed by February 2006 and take effect by 2007.
If prices go back into climb mode because of regulations, will there be Senate hearings with the heads of The Sierra Club and Greenpeace as witnesses? Doubtful–It will be the oil companies’ fault. Isn’t that obvious?
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Previous Post: Memo to Jean Schmidt and the Rest of Congress: On Economics, Ethanol Is a Loser
“I have got more out of alcohol than alcohol has got from me.” - Winston Churchill.
Ethanol is too valuable to burn!
Environmentalists love higher fuel prices and congestion. they believe the costs involved will cause us to relocate to more environmentally friendly cubicles in Transit Oriented Development, or pedestrian friendly, highly accessible, and vibrant, but crime ridden urban neighborhoods.
They don’t seem to understand that such places are noisy dirty energy sinks that prey on the surrounding environment for sustenance, and waste disposal. They don’t realize that such inahbitants will want to escape the city to glimpse the privately held and tax exempt countryside that remains in the hands of the new landed gentry. They don’t seem to understand that the fuel we “save” will be used elsewhere and that its manpower multiplying effect will be used against us.
Why are you surprised that environmentalists favor such policies?
Full disclosure: Mr. Hyde was trained as an environmental chemist and worked in studies for remediation of hazardous material sites.
Comment by Ray Hyde — January 14, 2006 @ 8:58 pm