Fueling Fury: Hosed at the pump by Environmentalism

For some, the month of May marks the beginning of the end. The temporary end of lower gasoline prices that is. The summer driving season commences; giving rise to weekend trips to the cabin (likely to be much greater given economic situations leading people to adopt more local based summer travel plans) often with either Boat or Jet Ski in tow, and bringing of course with it a greater demand for gasoline. However, were that increase in demand not in and of itself significant to warrant a noticeable price increase at the pump, this increasing demand is further strained in complying with the Clean Air Act.

As part of the provisions set forth in the Act, oxygenated mandates go into effect during the summer months as refineries struggle to meet the demands of refining what are termed “boutique blends” of gasoline. There are at present, depending on various accounts, anywhere from 15 to 38 of these different specialized blends of gasoline; blends designed to help clean the air but ones which have, in a single decade, amounted to greater economic harm than environmental good. And, while countless studies have shown that vehicle turnover, from older, dirtier, and less efficient fuel burning vehicles to newer and cleaner burning ones, has had a greater emissions impact than the numerous blends themselves, environmental policy continues to trump all else when it comes to domestic energy policies. This is neither sensible nor economically feasible.

When it comes to these boutique blends of gasoline, what is good for the goose is not so good for the gander. Supply disruptions will abound; a fire here, a burst pipe there. Under normal operations outside of the oxygenated mandates, the impacts of such disruptions are minimal. One refinery can cover any lost output and the product can be shipped to the appropriate region given that all regions are burning the same blend of fuel. But during the summer months this isn't the case. Due to the countless number of specialized gas blends and the complexity of the specialized regions which accompany them, problems reflected by these types of disruptions during the period of oxygenated mandates is further compounded. Specific blends are designated to specific regions. Thus, merely diverting one refinery's blend to another region isn't a permissable practice. And, because the industry implements wholesale pricing measures which dictate pricing according to replenishing inventory, even a minor disruption can result in a $.20 increase despite the fact of a station “already having the gas” of which you paid less just a mere two hours prior. These oxygenated mandates attempting to sire the alchemic process in a futile search for environmental gold are just one of many in a long list of environmental policies which are largely responsible for the infamous “summertime blues” not to mention your own financial woes.

Furthermore, equally attributable and literally fueling the pain many Americans are experiencing at the pump (and elsewhere), corn based ethanol has quickly become the new sugar daddy amongst political parties. While Democrats have largely been affiliated with the farming industry, far too many Republicans namely Minnesota's very own Governor Pawlenty (and many other Midwestern GOP politicians), have jumped on the ethanol bandwagon in favor of massive government subsidies for the state’s corn growers and ethanol refineries (to the statewide [Minnesota] tune of $287 million in grants) as well as pursued statewide mandates on increasing ethanol availability at the pump. And yet, despite the recent epiphanies of many previous apologists (New York Times Editorial 5/11/2008) for the Ethanol experiment which has been a collosal failure, further pursuit of this political policy is now wholly adopted by the Obama administration (Article here: http://www.azstarnet.com/sn/news/291705.php).

But, while corn based ethanol has proven a safer if not satisfactory replacement to previous lead and methanol additives in gasoline, it is far from a cure all when it comes to replacing petroleum based fuels. For, not only has this increase in the demand for corn led to higher prices on beef, soda and cereal, even going so far as to cause protest 2 years ago amongst Mexicans irked at the rising cost of tortillas, the doubling of corn’s cost per bushel over the past number of years coupled with the oxygenated mandates is too affecting prices at the pump. Furthermore, from a greater economic standpoint (and politicians know this), ethanol production without its subsidies is neither sustainable nor viable in the least not to mention it costs twice as much to produce. And, were we to remove the subsidies afforded to ethanol, its prices would still be higher than those currently of gasoline; prices mind you which are not exempt from fluctuating oil prices. Moreover, because production costs of refining corn based ethanol exceed the benefit of its output (25-30% less energy with E85 compared to its petroleum based nemesis thereby equating to less mileage per gallon) we ought to consider a more sensible ethanol alternative (if one at all) such as that from switchgrass by implementing a policy of removing the $.54 per gallon tariff on ethanol imports from Brazil rather than unnecessarily bloating our current price on a gallon of gasoline while at the same time diverting necessary corn resources towards ethanol production. But alas, environmental policy trumps all else. Which brings me to my final point.

The pursuit of ethanol as an energy alternative is one which is deemed more environmentally friendly and one which attempts to save us from our “dependency on Middle Eastern oil”. While the former is argued by the likes of the U.N. as well as Stanford’s Professor of Civil and Environmental Engineering Mark Z. Jacobsen, the latter is the biggest canard ever put forth to the American people; one that I hear all too often and one quite frankly that when uttered by environmentalists and policy makers alike, I would love none other than to point out that, if even it were true, would have been brought on largely by a failure to pursue greater domestic exploration. And, while Saudi Arabia remains fourth behind Canada, Mexico, and Venezuela in supplying American oil, several studies have shown that we could replace this daily import simply by drilling in ANWR. Yet, dare I say that once again environmental policy is dictating energy policy.

While it is indeed admirable to explore energy alternatives, such alternatives ought to be economically just while at the same time environmentally reasonable. Yet, we have in America continued to pursue policies which dictate otherwise. Putting the cart before the horse is hardly practical. And, as it is said, one cannot have their cake and eat it too. For, so long as policy makers and the environmental movement seek to invoke policies that stifle domestic exploration, be it drilling in ANWR, drilling on the outer continental shelf, tapping the Rockies for natural gas, allowing energy companies the freedom to further explore clean coal technologies, opposing the potentials of clean nuclear energy, mandating numerous oxygenated blends as opposed to just a single one, limiting refining capacity by prolonging construction of new ones, taxing and regulating our current supply and a myriad of others, consumers cannot expect to be afforded the benefit of gas prices which they deem appropriate.

And, while I’m not an advocate of these higher prices at the pump, collectively we at least ought to agree that there is much more than simply “Big Oil” profitability (far be it for me to point out profit motive as a positive here) which leaves us fuming.