Oil and Gas companies in the Houston area are warning consumers of a potential spike in gas prices. But this time they’re not blaming the increase on a natural disaster. They claim the fault lies with a new law passed by Congress. From Capitol Hill, Terry Gildea reports.
Inside the Energy Policy Act is a provision called the Renewable Fuels Standard. It requires a percentage of gasoline be blended with ethanol so the fuel will burn cleaner. Energy companies have long opted to use the chemical MTBE instead to accomplish the same task. But many of those same companies are now embroiled in pollution lawsuits because MTBE was found to pollute ground water. Energy lobbyists failed to convince lawmakers to pass strong liability protections for using MTBE. Now, the only economically sound choice is using ethanol to meet the federal clean-air requirements. John Felmy is chief economist for the American Petroleum Institute. He says the transition from MTBE to ethanol will take time and money.
“…We have to do dramatic changes to the refineries so that we can produce the new base gasoline to be blended with ethanol. So we’re making major investments in that regard.”
Some energy industry analysts are predicting gas prices could rise between thirty and sixty cents, pushing the price per gallon well over the three dollar mark. Republican Texas Senator John Cornyn sees no reason why ethanol should replace MTBE.
“…The concern about MTBE is that some negligent individuals have stored it in leaky tanks and it’s drained into the water. Well, the answer to that is not to ban the MTBE, it’s to fix the leaky tanks.”
President Bush acknowledged the nation is addicted to foreign oil in his State of the Union address and called on America to increase production of renewable energy. Democratic Houston Congresswoman Sheila Jackson Lee says congress must intervene if the introduction of ethanol results in a price spike.
“…It’s up to the federal government to promote the good aspects of ethanol usage. I still think it’s important to give the consumer at the pump relief.”
But the ethanol industry disputes what it calls rumors of a price spike. Matt Hartwig of the Renewable Fuels Association says ethanol producers are working with refineries to meet predicted demand.
“…If consumers do see any impacts, those impacts will be mitigated and their duration will be short.”
Democratic Congressman Gene Green predicts the energy market in Houston will adjust as ethanol becomes a mainstream product.
“…Any ethanol we can produce should be cheaper than sixty dollars a barrel. I think you’ll see large companies who are traditionally energy companies – get into the business of owning ethanol plants. But again, it’s going to take time to do it.”
Residents are already feeling the pinch. Gas prices rose between twelve and seventeen cents across Texas in recent weeks and are almost fifty cents higher than they were a year ago. For Houston Public Radio, I’m Terry Gildea on Capitol Hill.