DU Economics experts, Please help me understand this...

[usregimechange]

Recently, Roy Blunt has proposed the following:

"Suspending nationally the EPA reformulated gasoline
program’s oxygenate mandate, which will permit
refiners additional flexibility to increase their
refineries’ output of gasoline."1

However, a Texaco memo from 1996 states:

"...One example of a significant event would be the
elimination of mandates for oxygenate additions to
gasoline. Given a choice, oxygenate usage would go
down, and gasoline supplies would go down
accordingly." 2

Getting rid of the oxygen mandate would increase air pollution but how would it effect gas supply?

Thank you for your time,

usregimechange

http://majoritywhip.house.gov/news.asp?formmode=SingleRelease&gcid=833
http://www.consumerwatchdog.org/energy/fs/5104.pdf

[NMDemDist2]

1. I"m no expert, but I remember an article or talk that says the

"pollution savings" from oxygenation was negated by the additional gas it causes cars to burn. it actually decreases fuel economy IIRC.

You should ask this in the Environment and Energy forum, they would probably know a lot more :)

http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=115

[usregimechange]

2. Well the NRDC was saying it decreased pollution but...

What I really want to know is why Blunt is saying it will increase supply and/or what it would do to supply...

[punpirate]

3. Blunt's lying his butt off...

... the Texaco memo describes how it works--every refiner uses a little bit of alcohol or a similar compound to raise octane. But, in those states that mandate an oxygen improver, the standard is ethanol, at about 9-11% by volume. So, if suddenly, one isn't required to add ethanol (which the refiners must purchase from companies like ADM), they don't have an added cost, and the volume of gasoline goes down by a comparable degree, thus creating mild shortages in supply, thus driving up the retail cost even higher.

If, say, in Iowa, they're required to add ethanol, then if they barely meet demand with 900,000 gallons of gasoline and 100,000 gallons of ethanol blended together to make 1 million gallons of gasohol, and suddenly, they're not required to add the 100,000 gallons of ethanol, what happens to the supply?

Cheers.