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Refiner's change could raise gas prices
By Chris Woodyard, USA TODAY
Motorists could face even higher gasoline prices — perhaps as much as 9 cents a gallon more — if other refiners follow the lead of Valero Energy in quickly withdrawing a controversial fuel additive.
One of the nation's largest refiners, Valero decided this week to stop producing and blending the additive MTBE in gasoline. The company said it was taking the action because refiners didn't receive liability protection regarding the additive in the energy bill passed last week by Congress. MTBE, a petroleum-based oxygenate aimed at reducing air pollution, has been blamed for polluting wells and groundwater.

The decision could cut Valero's production of gas for the U.S. market by 2.5 million gallons a day, the company warned. The biggest effect would be felt next spring after the bill has taken effect.

If other refiners follow its lead, Valero said, the market could lose a total of about 10.9 million gallons of gas a day. None of the other majors could be reached for comment. It could take about a year to restore even half of the lost capacity, Valero spokeswoman Mary Rose Brown said in the statement.

Valero said it refines one out of nine gallons of gas in the USA.

The MBTE issue is "throwing fuel on the fire" of rising gas prices, said Seth Kleinman, market analyst for consultant PFC Energy. "This could add a few cents or more to the price of gasoline" — just how much is difficult to estimate, he added.

The switch would complicate not only refineries in the USA, but those abroad that serve the U.S. market as well, Kleinman said.

California, which already has some of the highest gas prices in the nation, wouldn't feel much of an effect. It is among the states that have phased out MTBE and replaced it with ethanol. Since the phaseout took several years, motorists didn't see as startling a difference in gas prices, said Ed Murphy, marketing director for the American Petroleum Institute, a Washington-based trade group.

Valero said that when New York banned the additive last year, the cost difference between conventional gas and the reformulated fuel was only 2 cents. Now, it's 11 cents.

But Valero's action could prove a shock to the system.

"It's clear costs are going to go up," Murphy said.

He said it takes about a year for refiners to switch to different gasoline formulations without major disruptions.

"We've got a hurdle here that wasn't anticipated, but we've got nine months to try to fix it," Murphy said. President Bush is expected to sign the bill this month, and the change goes into effect about 270 days after that.

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