Ethanol Producers Say Gas Switch Going Well

By John Christoffersen

Associated Press

STAMFORD (AP) –– Connecticut and New York should not see a sharp rise in gasoline prices when bans on the additive MTBE take effect in January, a trade group said November 10.

The Renewable Fuels Association (RFA), which represents ethanol producers, is taking issue with last month’s report by the federal Energy Information Administration. The EIA said last month that substituting ethanol for MTBE in gasoline presents supply challenges that could lead to temporary price spikes of between 30 cents and 40 cents per gallon.

Following California’s lead, New York and Connecticut are banning MTBE in gasoline because the additive has been found to contaminate ground water supplies.

“We feel there is no reason to conclude that there is going to be any abnormal price fluctuations,” said Monte Shaw, spokesman for the association. “I don’t see a pump price impact from this switch based on all the information we have today.”

He could not rule out price volatility in Connecticut and New York next year, but said it would not likely be from the switch to ethanol.

The EIA said the price spike could occur if the transition does not go well and cited experiences in other parts of the country. The EIA, which is part of the US Department of Energy, has not analyzed the transition extensively, said Doug MacIntyre, senior oil analyst with EIA.

“We haven’t heard anecdotally of any major problems so far,” Mr MacIntyre said Monday. “I guess we’re cautiously optimistic.”

Officials with the Renewable Fuels Association said price hikes experienced in California and Chicago stemmed from other problems, such as refinery outages and pipeline ruptures, unrelated to the switch to ethanol. They said ethanol supplies for New York and Connecticut will be ample and delivered in a timely and cost-effective manner.

“This looks like it’s going pretty well,” Mr Shaw said.

Refineries and gas station owners appear ready for the change, said Chris Herb, associate director of the Independent Connecticut Petroleum Association, which represents 350 heating oil and gas stations.

But he expressed concerns about fewer supply points because neighboring states are not making the switch.

“We’re kind of on an island here,” Mr Herb said.

He also said refineries and gas stations are experiencing infrastructure costs stemming from the switch that could be passed on to consumers in some cases.

Some gas station owners are worried.

“It’s in the hands of the major oil companies. You never know what they’re going to do when they seem to want to print money,” said Michael Fox, executive director of the Gasoline and Automotive Service Dealers of America in Connecticut.

RFA officials said the supply of ethanol has been increased from 1.75 billion gallons of ethanol capacity annually in 2000 when the bans were passed to more than three billion gallons this year.

“There is more than enough ethanol to supply those additional markets,” Shaw said.

Methyl tertiary-butyl ether (BTMB), a byproduct of petroleum and natural gas, increases oxygen in gasoline so it burns cleaner in combustion engines and reduces air pollution. Refineries add it to comply with the federal Clean Air Act’s reformulated gasoline program for high-smog areas.

The most abundant replacement for MTBE is ethanol, produced from corn.

California had three price run-ups last year, the longest lasting about a month starting in mid-February, coinciding with the start of its formula change and some major refinery outages, EIA officials said.

More than a dozen states have enacted similar MTBE bans but with later deadlines.