Bush’s gas cut plan: Too little, too late

President George W. Bush’s latest plans to fight high gasoline prices in the United States are either too limited or too late to make a difference during the upcoming summer driving season, energy analysts said on Wednesday.

With pump prices over $3 per gallon in some parts of the country, Bush said on Tuesday he would boost gasoline supplies by letting regulators relax clean fuels rules temporarily if state governors ask. He said he would free up more crude oil by delaying deliveries into the Strategic Petroleum Reserve.

Analysts doubted whether either proposal would reduce gasoline prices.

“The EPA Administrator has the authority to grant (clean fuels) waivers based on a demonstrated and unanticipated supply shortage. Not only is the current gasoline crisis more of a price than a supply issue, but the event causing the shortage also is not unanticipated,” wrote energy analyst Jacques Rousseau of Friedman, Billings, Ramsey & Co.

Refiners and fuel marketers have been struggling to phase out clean-burning gasoline blends containing the toxic chemical MTBE and replace them with new blends containing ethanol, touted as one way to cut U.S. dependence on imported oil.

But ethanol is difficult to transport. Since it absorbs water easily, it can only be blended into gasoline just before it is sent to service stations rather than in refineries. This means more gasoline must be distributed by railroad, trucks or tankers rather than pipelines.

Gasoline retailers blame some recent price increases on problems associated with the transition to ethanol. Tanks that held MTBE-laced gasoline must be drained and cleaned, and trucks must be obtained to get ethanol to blending sites.

So far, Pennsylvania, facing supply shortages in five counties, has been the only state to request temporary relief from clean fuels regulations that mandate the use of cleaner burning reformulated gasoline in urban areas. Gasoline retailers in Virginia are pushing for a waiver.


Analysts said Bush’s plans to delay deliveries of crude oil into the government’s emergency oil reserves were unlikely to blunt oil prices.

“There’s already plenty of crude in the market. Adding more crude to a market that already has plenty of crude doesn’t make much of a difference,” said BNP Paribas analyst Tom Bentz.

Other analysts noted that deliveries into the SPR for May were slated to be only 2.1 million barrels, a fraction of the roughly 300 million barrels U.S. refineries were likely to consume in May. The Bush Administration pointed to this discrepancy in 2004 when it rejected calls by Democrats to cease deliveries into the SPR to lower oil prices.

U.S. drivers should get some relief at the pump in coming weeks even without the Bush proposals, as many U.S. refineries return to normal operations after lengthy downtime for routine maintenance and repairs after hurricane damage, analysts said.

But uncertainty about the security of oil imports from Nigeria and Iran and tight oil production capacity worldwide will to keep crude oil prices at higher than normal levels, which means gasoline prices are unlikely to fall by much.

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