Eliminating Additive Would Boost Gas Price, Report Says
A plan to remove the potentially cancer-causing additive MTBE from gasoline would boost fuel costs about 6 1/2 cents a gallon, a preliminary state Energy Commission analysis says.
A spokesman for companies that produce ethanol, a likely substitute for MTBE, said Monday that the cost estimate was too high. Tom Koehler said the price would be lower because more ethanol would be produced, thus lowering its cost.
Congress has ordered areas with severe air pollution, such as parts of Southern California, to use fuels with oxygenates. Oxygenates, including MTBE, cause gas to burn cleaner.
Scientists say, however, that MTBE may cause cancer and can seep quickly into drinking water. Gov. Gray Davis ordered it phased out by the end of 2002.
At an Energy Commission panel’s hearing Monday on proposed state Air Resources Board regulations to ban MTBE, commission analyst Gordon Schremp said the regulations would require refineries to invest $564 million, producing the price boost at the pump.
The 6 1/2-cent increase means that a motorist who buys 1,000 gallons of gasoline a year could pay an additional $65 annually.
“Depending on what your household income is, that could be a pretty big hit,” Schremp said.
MTBE, or methyl tertiary butyl ether, cuts smog by making gasoline burn more completely.
Although oxygenates are required in areas with severe pollution, they are not required in areas with purer air, such as the Bay Area. It was unclear what effect the removal of MTBE would have on prices in areas not required to sell oxygenated fuel.
An analysis done last year predicted about a 2-cent increase in gas prices with the removal of MTBE, but that was based on a longer term phaseout, Schremp said.
Koehler said last year’s analysis was better in one important way.
“In the 1998 analysis they assumed there would be capital investment to increase [ethanol] production,” Koehler said. “In this analysis they assume no more capital investment, which is not a valid assumption.”
