The Bureaucracy of Gas

How many blends of gasoline do we use in the United States? Steven F. Hayward, a fellow at the American Enterprise Institute writing for the Weekly Standard, answers the question and suggests a solution to lowering the outrageous prices that Americans pay at the pump.

The actual number is somewhere above 45, though hard to pin down exactly, according to the Government Accountability Office (GAO). It might even be closer to 70. Thirty-four states use specially blended gasoline, usually during the summer, which is one reason gasoline prices always rise during the “driving season.”

Who is the culprit behind the myriad blends of gasoline and is one reason why prices are so high? Hayward points the finger at meddling EPA bureaucrats and the Clean Air Act, which creates “a proliferation of [state specific] boutique gasoline” that “suppresses competition and drives up prices.” The result is if you are in St. Louis, Missouri, you will be forced to buy one kind of gasoline and if you are in East St. Louis, Illinois, right across the Mississippi River, you will be forced to purchase another blend.

The rise of boutique gasoline blends led a GAO report to conclude: “The proliferation of special gasoline blends has made it more complicated to supply gasoline and has raised costs.”

What is even more alarming is that the principal argument for creating boutique gasoline blends, mainly that so “our children can breathe cleaner air,” seems to be suspect. Boutique gas only delivers marginal air quality benefits according to experts.

Hayward has a solution for President Obama and Congress:

Here’s an opportunity for President Obama to “do something” about gasoline prices, even if it’s only by a dime per gallon. (And the difference between $4.95 gas and $5.05 gas might be the difference between reelection and defeat.) The Clean Air Act allows the EPA to waive the boutique gasoline requirements in the event of supply disruptions or shortages. Indeed, the boutique gasoline requirements were waived in the aftermath of Hurricanes Katrina and Rita in 2005, when more than half the Gulf Coast refineries were knocked out of commission for several weeks. During the waiver, we imported gasoline from overseas to fill the gap, and prices were kept stable. There was no noticeable uptick in ozone levels in the EPA data. While high-priced gasoline might not meet the precise definition of a disruption or shortage, it shouldn’t be a problem for the clever lawyers of the Obama administration to come up with a plausible legal rationale for suspending the regulations.

Failing that, the House should pass a quick amendment to the Clean Air Act abolishing the boutique gasoline regime, and then dare the Senate or the president to block a measure that would offer relief at the pump this summer. The ethanol lobby would scream, along with environmentalists who never met a regulation they didn’t like, while refiners would quietly rue the loss of an artificial market-segmenting system that expands their profit margins. Sounds like a win-win all the way around.

The bureaucracy of gas is a major contributor to America’s lagging economy. Eliminating the boutique gasoline regime would go a long way to helping Americans, both those who own and operate small businesses and those American families just trying to live the American Dream.