Bloomberg News

Northeast Fuel Rule Would Double Gasoline Prices, Group Says

March 26, 2012

A low-carbon fuel standard proposed by 11 U.S. East Coast states would double the region’s gasoline prices by 2021, a group representing energy consumers and suppliers said in a report.

Requiring a 10 percent reduction in carbon emissions from transportation fuels by 2021 would raise gasoline prices in New York alone to $6.11 a gallon in 2009 dollars, according to data in a report released by the Consumer Energy Alliance, whose members include Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), and Dow Chemical Co. (DOW) Diesel prices would increase 18 percent, the Houston-based group said.

Gasoline futures rose 26 percent this year through March 23, the most of any commodity in Standard & Poor’s GSCI index, on speculation that refinery closures on the East Coast will crimp supply in New York Harbor, the contract’s delivery point. Plant shutdowns are expected to cut the region’s refining capacity in half by July, Energy Department data show.

“Families and businesses in the Northeast and Mid-Atlantic are facing record high fuel prices and refineries in the region are shutting down,” Michael Whatley, an executive vice president for the group in Washington, D.C., said in a statement. “Implementing a regional LCFS would kill 147,000 jobs, reduce GDP by $27 billion, and double today’s already soaring gas prices.”

Fuel Standard

New York and 10 other states in the U.S. Northeast have been working since 2009 to develop a fuel standard that would reduce the carbon intensity of fuels by as much as 15 percent in the next 15 years.

Such a standard might reduce annual gasoline and diesel use by 4 billion to 9 billion gallons by replacing them with cheaper alternatives such as electricity and natural gas, the states said in an economic analysis released last year.

California adopted the country’s first low-carbon fuel standard in 2009. A federal court found the standard unconstitutional and the state has appealed the ruling.

The group of Northeast states, known as NESCAUM, have the advantage of “learning from California’s experience,” Kenneth Kimmell, commissioner of the Massachusetts Department of Environmental Protection, said in an e-mailed statement.

“As we await the outcome of California’s appeal of a recent federal district court decision, we will continue the technical and policy analysis of clean fuel strategies, including analyses of alternative programs that could improve air quality,” he said.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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