President Obama and the EPA: sticking their hands into your pockets yet again

Thanks to Shane Vander Hart of Caffeinated Thoughts, I found this news item:


Senators warn new EPA rules would raise gas prices

Published January 13, 2012
Senators from both sides of the aisle are warning that looming EPA regulations on gasoline could impose billions of dollars in additional costs on the industry and end up adding up to 25 cents to every gallon of gas.

The senators, in a letter this week to EPA Administrator Lisa Jackson, urged the agency to back off the yet-to-be-released regulations. Though the EPA has not yet issued any proposal, they claimed the agency is planning to call for a new requirement to reduce the sulfur content in gasoline.

Citing the nearly $3.40-a-gallon average price of gas and the state of the economy, the senators said “now is not the time for new regulations that will raise the price of fuel even further.”

They said it would be “expensive” for companies to meet the sulfur targets and cited a study that found it could add up to $17 billion in industry-wide, up-front expenses, in addition to another $13 billion in annual operating costs.

Take a close look at the picture on the right. Note how diesel fuel is, at this station in North Carolina, 62¢ a gallon more than gasoline. You might ask: why is diesel fuel more expensive than gasoline, when gasoline is a more highly involved refining process than is diesel? There are several reasons:

  • Worldwide, the demand for diesel is higher than the demand for gasoline;
  • Taxes are higher on diesel fuel than gasoline; and
  • Environmental regulations.

Diesel is not used just in commercial trucks and trains, but is used for many other purposes; home heating oil is really just diesel fuel. That increases demand. However, though the US is a net importer of crude oil, we are a net exporter of refined fuels; worldwide demand for diesel should make gasoline more expensive, in that the oil refiners would have a profit incentive to produce more diesel, and therefore less gasoline, for a world market which would pay higher prices for diesel, but the gap between diesel and gasoline is, and has been, growing.

Federal excise taxes on diesel fuel are higher than on gasoline, but not that much higher. The federal tax on diesel is 24.6¢ per gallon, while the federal tax on gasoline is 18.4¢ per gallon, just a 6¢ difference. In North Carol

ina, where the picture was taken, state gasoline and diesel taxes are the same, 26.6¢ per gallon.

The real culprit was an Environmental Protection Agency regulation, which took effect in 2006, requiring a drastic reduction in sulphur content in diesel; 80% of the diesel produced had to have a reduced sulphur content, down from 500 parts per million (PPM) to 15 PPM.1 By December 1, 2010, the standard was for 100% of diesel fuel for over-the-road usage. Higher sulphur contents are allowed for off-road use, such as construction equipment and generators, and higher than that for home heating oil. That drastic a sulphur reduction is very costly, and adds significantly to the price of diesel fuel.2

So, what are the new, proposed EPA regulations on gasoline? Yup: reducing sulphur content, which, as the Fox original noted, is estimated to add roughly 25¢ per gallon to the price of gasoline. If you drive 40,000 miles per year, and average 20 miles per gallon, you will by buying 2,000 gallons of gasoline; at a 25¢ per gallon premium for the lowered sulphur requirements, that's $500 a year out of your pocket. The 2% reduction in the employee's portion of Social Security taxes that President Obama proposed? What the government “gives”3 with one hand, it takes with the other.

President Obama and his re-election campaign will spend the next ten months telling the voters what a great friend he is to the working man, but, like any good pickpocket, he'll be distracting you with what he says while he quietly steals your wallet.

  1. The EPA estimated, in 2001, that refineries would actually have to average around 7 PPM for over-the-road diesel: “Highway diesel at the refinery gate will contain a maximum of 7 parts per million (ppm) sulfur. Although sulfur content is limited to 15 ppm at the pump, there is a general consensus that refineries will need to produce diesel somewhat below 10 ppm in order to allow for contamination during the distribution process. The EPA assumed in its RIA that refineries would produce highway diesel at 7 ppm.”
  2. On top of that, each of the three grades of diesel must have a dye added to the fuel, so that a law enforcement officer can sample a tank and immediately be able to tell which grade of diesel is being used. The idea is simple: a diesel truck can run just as well on home heating oil, which has both a higher sulphur content and is taxed less, so any trucking company or individual owner-operator could significantly reduce his fuel costs by running home heating oil instead of over-the-road diesel fuel in their trucks. With the fuel dye, he would be caught immediately if he was ever inspected, and no trucker wants to pay that fine! The dying process adds more to the cost of the fuel. It also increases costs at other businesses; I have to maintain three separate diesel tanks at my plant, for each of the three grades of fuel.
  3. Actually, what the government doesn't take.

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