An Associated Press story by H. Josef Herbert on June 23 says “no,” based on a draft”obtained” by APthe night before. According to Herbert, the study does not blame boutique fuel requirements “for the run-up in gas prices, which has produced $3-plus gas in some parts of the country.”
The report itself raises a number of interesting questions about boutique fuels, but it says virtually nothing about their effect on prices.
On April 25, President Bush directed EPA Administrator Stephen Johnson to convene a task force on boutique fuels, as well as issue waivers from summer fuel requirements. The conversion to summer fuel required massive increases in ethanol use. We hypothesized that the ethanol requirement is the proximate cause of sudden high prices this spring, and that waivers would cause prices to drop. Prices didn’t drop, but the Washington Times reported in May that EPA didn’t issue any waivers.
Separately, Bush suggested that boutique fuel requirements might be the culprit–hence the creation of the task force. According to EPA, “[t]he mission of this task force is to find ways to reduce the number of boutique fuels and to increase cooperation between states on gasoline supply decisions.” It’s not clear how this was responsive to the president’s stated concern. Johnson promised to deliver the report to the president before the end of June.
In order to meet this timeline, EPA will hold a series of meetings to provide states the opportunity to present their views and recommendations. EPA also will involve industry experts, public health organizations and other interested parties.
The “series of meetings” consisted of:
- A technical presentation by EPA staff on May 12 (supported by two prior EPA studies)
- A stakeholder conference call on May 18 at which comments submitted by more than a dozen interested parties were shared and discussed
EPA did not publish public notice in the Federal Register.
EPA summarizes the report as follows:
The report’s major observations and recommendations include:
- State fuel programs have provided significant, cost-effective air quality benefits. Any action to modify the state of existing boutique fuels or limit a state’s ability to adopt fuel programs must at least maintain air quality gains and avoid unnecessary restriction.
- Any future analysis of potential changes to the number and types of fuels must utilize the most up-to-date data and analytical tools and ensure that all aspects are appropriately addressed, including impacts changes to fuel requirements may have on air quality, as well as the new generation of vehicles, fuel distribution, supply, and costs.
These statements are unresponsive to the question posed by President Bush and answered negatively by AP reporter Herbert — do boutique fuel requirements raise prices? According to Herbert:
So-called boutique gasoline blends to help states meet clean-air rules are not a factor in higher prices as President George W. Bush has suggested, says a draft of a study ordered by the White House.
For more insight we need to review the actual EPA report.
WHO COMPRISED THE TASK FORCE?
The task force is described on page 3:
Administrator Johnson invited all 50 Governors, or their designated representatives, to participate in a Task Force on Boutique Fuels (Task Force) which was composed exclusively of representatives from the States, EPA, and the Departments of Energy and Agriculture.
The report is opaque:It does not identify the members of the task force, what procedures the task force used, or what voting rules governed the process of reaching conclusions.
WHOSE REPORT IS IT?
The report belongs to EPA:
After carefully evaluating comments from the Task Force participants and stakeholders, EPA submits to the President this report of findings, actions and recommendations for consideration in addressing boutique fuels…
That is, EPA took input from selected federal agencies and some states but reached its own conclusions, largely based on two 2001-vintage Agency studies.Thus, the report summarizes prior EPA views. It is not an independent review of the boutique fuels program, nor is it an independent evaluation of its effect on gasoline prices.
Non-EPA task force members were allowed to review and comment on EPA’s report, and EPA summarized these comments as follows:
Upon completion of the Task Force meetings, a draft Report to the President was prepared by EPA staff and presented to Task Force participants for review. Responses included general observations, recommendations, and editorial suggestions to improve the Report, and suggestions regarding further actions, additional information needs, and further points for analysis.
The degree of task force support for EPA’s conclusions cannot be independently ascertained. Insight might be gleaned from reviewing what task force members actually said. Indeed, according to the text of the report an independent reviewer could plausibly reconstruct the views of State task force members:
A complete set of materials submitted by state participants is available on the EPA Boutique Fuel Task Force website at http://www.epa.gov/otaq/boutique-taskforce.htm. The table below provides a brief summary of the comments. These comments were considered by EPA in preparation of the final version of this Report to the President.
But none of these materials are on the EPA website. (By limiting the reference to states, the report implicitly admits that comments from the Departments of Agriculture and Energy were not made public. A Freedom of Information Act request is probably necessary for the public to see them.)
WHAT EFFECTS HAVE BOUTIQUE FUELS HAD ON GASOLINE PRICES?
The report conveys a simple message about this question. First, EPA does not know whether boutique fuels have increased gasoline prices. The Agency concerns itself only with production cost.
[T]he task force received some general input from industry stakeholders with some suggesting a potential connection between boutique fuels and supply and price concerns, this input was not supported by any documentation in this process. EPA’s assessments focus on the cost to produce fuels. These assessments indicate that boutique fuels have a very small impact on production costs. EPA does not conduct market price analysis of boutique fuels (p. 19, emphasis added).
Second, EPA is not terribly interested in finding out. The question that prompted the task force review was never addressed.