California should defer MTBE ban til 2005 - study
Date: 21-Feb-02
Country: USA
Author: Soo Youn
If the phase out continues as scheduled for Dec. 31: "It will result in a supply shortfall of 5 to 10 percent for the California gasoline pool as a whole," the study, unveiled at a meeting on the issue in Sacramento this week by consulting group Stillwater Associates, said.
"A 5 to 10 percent shortfall translates into price levels 50 to 100 percent higher than normal, i.e.., prices will move in the range of $2 to $3 per gallon when crude oil pricing and refinery operations would normally have resulted in pricing around $1.50 per gallon," the study continued.
Current federal regulations require the use of an oxygen-enhancing additive to be used in mandated reformulated gasoline. MTBE has emerged as the "oxygenate" of choice.
Although MTBE has succeeded in helping fuel burn more cleanly, over the years, it has been dogged by findings that it is contaminating ground water and by some studies suggesting it a suspected carcinogen, leading California and at least a dozen other states to ban its use.
MTBE's troubles equal an opportunity to its only possible alternative, corn-based ethanol.
But ethanol has its own problems that make the MTBE ban problematic. The alcohol, which is mostly produced in the Midwest, has chemical properties that make it difficult to transport, leading analysts to question how it can get to California without passing dramatic price increases to drivers.
Further complicating the MTBE vs. ethanol question was a decision by the U.S. Environmental Protection Agency (EPA) last year denying California's request to make the state's cleaner-burning gasoline without either oxygenate.
As a result, Governor Gray Davis is considering delaying the ban until the logistics for substituting ethanol are further developed.
"Previous CEC work concluded supplies of (all) imported gasoline and components would be plentiful, and that marine infrastructure to handle the additional imports would be adequate" CEC fuels analyst, Gordon Schremp, said in a presentation. "Both of these findings appear to be incorrect in light of new information," Schremp said.