There’s more evidence supporting Neutral Source’s hypothesis that environmental regulations are responsible for the recent surge in retail gasoline prices and local supply shortages.
In today’s Wall Street Journal, reporters John D. McKinnon, John Fialka and Jeffrey Ball cover President Bush’s speech (subscription may be required) before the Renewable Fuels Association, the self-described national trade association for the U.S. ethanol industry. McKinnon et al. express doubt about the practical effect on retail gasoline supplies and prices of several of the president’s proposals. But they characterized more favorably his directive to EPA to “grant waivers from air-quality requirements that now call for switching a main ingredient in so-called reformulated gasoline to ethanol from methyl tertiary butyl ether.” According to their account, “State and local officials have said they are worried about supply disruptions during the transition.”
McKinnon et al. also found support for the hypothesis that recent price spikes and supply shortages resulted from environmental regulations from at least one independent source:
Despite critics’ dismissal of the White House moves, the actions — particularly relaxing clean-fuel standards — could affect prices, oil analysts said. Doug Leggate, an oil analyst at Citigroup Inc., said in a research note following Mr. Bush’s speech that the “upside volatility associated with the transition towards clean fuels” has been a big factor in the recent rise in refiners’ stocks. “Should the EPA take swift action, the margin outlook could ease significantly,” he added.
Supply shortages always cause prices to rise.