The Environmental Protection Agency is preparing to implement a new regulation for gasoline that is expected to increase the price consumers pay at the pump.
Although the EPA completed the regulation proposal over a year ago,
sources familiar with the agency’s plans expect the rule to be released
sometime this month.
If the rule is passed, the regulation will require refineries to install new equipment to reduce the sulfur content in gasoline from 30 parts per million of sulfur to 10 ppm. The prior standard of 300 ppm was reduced just a decade ago.
Advocates of the rule argue that the new Tier 3 standards proposal will provide major health and environmental benefits for a relatively low cost.
However, in a letter
addressed to EPA Administrator Lisa Jackson, both Senator Democrats and
Republicans warned that the proposed regulation would impose billions
in additional refinery costs, and could add up to 25 cents to every gallon of gasoline.
The concerned senators explained that it would be “expensive” for
companies to meet the sulfur standards, citing a study that determined
the rule could add up to $17 billion in industry-wide, up-front
expenses, in addition to another $13 billion in annual operating
expenses.
How Gas Prices are Affecting Americans
Gas prices have already increased by roughly 15 percent
this year, up from a nationwide average of $3.34 for a gallon of
regular unleaded recorded in the last week of 2012 to the $3.86 price
level reached this week.
Despite the fact that gas consumption has been declining in recent
years, pump prices in 2012 accounted for the largest share of U.S.
household income in over 30 years.
Furthermore, the Energy Information Administration (EIA) found that
the average U.S. household spent $2,912 on gasoline last year – roughly 4
percent of American’s pre-tax income.
Both drivers and businesses are already dealing with the financial
pains caused by the spiraling gas prices and the economic difficulties
caused by the recession.
Economic Effects of Climbing Gas Prices
Evidence suggests that when gas prices climb,
the economy also suffers greatly. For instance, when gas prices
increase, consumers have less discretionary income to redistribute into
the economy. For households with multiple drivers, the financial burdens
are compounded.
Stocks for airlines, freight carriers and other companies that rely
on gasoline are also adversely affected because they lack sufficient
pricing power to offset the increased fuel costs.
Therefore, when gas prices climb, the result is a weakened stock market performance, which adversely affects both the market and individuals’ portfolios.
Combined data from the EIA and the U.S. Department of Labor also reveals a strong correlation between gas prices and the unemployment rate. As gas prices climb, the unemployment rate also rises sharply.
Implementing the Regulations
If the EPA issues the proposal, it would likely take the agency more
than a year to review public comments and finalize any plan.
The agency has the authority to tighten the sulfur standards under the Clean Air Act. Whether or not the standards are imposed is at the discretion of the EPA.
Because the standard sulfur content of gasoline was reduced by 90
percent just years a few years ago, many argue that the environmental
benefits of the new proposal are not enough to justify the additional
refinery expenses.
Considering the dire economic effects the proposed regulation will
likely cause American drivers and businesses, energy proponents are
lobbying against the rule to help prevent the anticipated pump pains
from hindering our nation’s growth.
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