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U.S. Expert Suggests End Of Fractionation Of Gasoline Market To Lower Gas Prices

May 24, 2011

An American scholar has suggested the reduction of taxes and end of fractionation of the gasoline market as short term ways to lower gas prices in the United States.

Kenneth P. Green, resident scholar at the American Enterprise Institute, told Xinhua in a recent interview that most options for bringing down gas prices are long-term propositions, whether it's increasing domestic production, or finding some decent replacement for gasoline.

These propositions won't have all that much influence on price, but would keep more of the petro-dollars circulating here, and creating jobs here, rather than flowing elsewhere, he said.

Vehicle electrification is problematic and again, a long-term proposition, he said.

"One thing that could be done relatively quickly that might ease prices would be to axe the many regulations that have divided the U.S. market into a bunch of smaller markets that must use custom boutique fuels," said the scholar.

He added that producing so many blends raises the costs of refining, and makes it hard to smooth prices out should a refinery in any given area has a problem.

According to Green, there are two short term ways that the United States could lower gasoline prices at the pump.

"The first would be, to lower gasoline taxes. Motorists pay high taxes to both the federal government and the state governments for the use of gasoline. A temporary reduction would help motorists," said Green.

"Another way to lower costs would be to end the fractionation of the U.S. gasoline market, which produced many unique fuels to meet many unique air pollution laws across the country," said Green.

That means that if one refiner, say in Texas, has trouble, Texans can not simply import gasoline in from a neighboring state, because the blend of the gasoline is set by law. This fractioned market drives up regional and overall prices, he added.

On ways to solve the oil problems in the U.S., Green said that policy makers may take an action without bothering to consider that people might respond to a given policy in a way that isn't exactly what the policy makers had in mind.

Green mentioned that U.S. Energy Secretary Steven Chu once wished that America shared such prices, when gasoline in Europe was the U.S. equivalent of 8 dollars per gallon. The expectation was that such prices would also lead to reduced greenhouse gas emissions.

"But what works in Europe won't necessarily work here: Americans are highly averse to seeing gas prices go north of 4 dollars per gallon, let alone 8 dollars, and U.S. markets, despite the increasing regulatory burdens they face, generally try to respond to what Americans want," said Green.

On clean energy, Green said he does not think that "greenhouse gases" should be lumped in with the rest of the pollutants to determine whether energy is "clean" or not.

"We should, definitely pursue coal power with excellent pollutant control, and the same for natural gas power, and gasoline and diesel," said Green.

He said that nuclear power is probably not economical, nor are wind power and solar power. The best policy for energy "is to make sure that there is a level and competitive market, and to internalize external impacts with highly targeted eco-taxes. The government has no role in picking and choosing winning or losing technologies."

Green said that expectations of the U.S. government on green technology for green energy are not realistic.

Contrary to the expectations, he said, "I find that it has resulted in job loss, higher energy prices, and corruption -- results that do not bode well for green job investments in the United States."

For example, in Spain, each "green" megawatt installed destroys 5.28 jobs elsewhere in the economy on average. Green programs in Spain destroyed 2.2 jobs for every green job created, while the capital needed for one green job in Italy could create almost five jobs in the general economy, according to Green.

He said that since 2000, Spain spent $771,000 approximately on each "green job," including subsidies of more than $1.35 million per job in the wind industry.

According to Green, wind and solar power have raised household energy prices by 7.5 percent in Germany, and have resulted in Denmark having the highest electricity prices in the European Union.

On the concept of "next-generation biorefineries," Green said, "At this point, I think they are mostly a fantasy. Nobody has come close to producing cost-effective ethanol from cellulose, nor biodiesel from algae."

"Those technologies, I think are at least 20 years away from even showing that they can be done cost-competitively, and then scaling them up to displace conventional fuels will take many decades. And any crop-based biofuel will compete with land for food, or for animal habitat, parkland, wilderness areas, and other important uses. These next-generation biofuels are no miracle," said Green.

On the recent increase in tornadoes through the U.S. South, Green said that it is impossible to blame any short term series of weather events, even those spanning several years to decades on climate change.

However, he stressed that the pattern of the climate is measured in 30-year blocks of average temperatures. Similarly, trends in storms often span decades, and are related to decadal cycles of climate activity such as the Pacific Decadal Oscillation and others.

"While I believe that the climate is changing and that human greenhouse-gas emissions cause some part of that change, the shrill attribution of things like Japan's earthquake and tsunami to climate change, and tying the recent tornadoes to climate change," he said.

On the lessons of the Japan earthquake and tsunami, Green said what people have learned is how amazingly resilient high technology, advanced democratic market economies have become over time.

"In the past, before Japan's industrialization and experience with former disasters, the outcome of the recent 9.1 earthquake and tsunami would have been horribly worse. What we learned from this disaster is that humans do learn over time, they learn, and they adapt," he stressed.

"While we can never live in a perfectly safe world, we can learn as we encounter hardship, build resilience to surprise events, and overcome even horrific natural disasters," said Green.

Source: Copyright Xinhua News Agency - CEIS 2011

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