That bad news was delivered by California Energy Commissioner James Boyd to a group of auto industry engineers and executives meeting in Los Angeles on Nov. 7. Boyd said that a combination of factors in the gasoline market is driving state officials to consider a wide range of policy options, from fuel efficiency standards for new autos to development of a state petroleum product reserve. “Price stabilization and supply are key commission goals,” he said. “Any spike in gasoline prices has a major economic impact.”

The impending squeeze, stems from a confluence of factors, according to Boyd, including worsening auto mileage, increased auto usage, overworked refineries, and increasing dependence on imported petroleum.

“Refineries are pretty much at capacity,” said Boyd. They are running so hard that outages have been occurring on a monthly basis, he said. The prospect for new refinery capacity is dim because any expansion projects are “way out on the cost-benefit curve,” said Boyd, and cannot comply with air pollution limits.

The state’s cars, trucks, and other transportation vehicles account for 50% of California’s energy use, according to the state Energy Commission. To fuel thirsty motorists, California has had to import more oil as the supply from Alaska’s North Slope declines. Twenty-nine percent now comes from abroad. Some 28% of those imports come from Iraq and 21% from Saudi Arabia.

The transportation fuel supply problem is complicated by the impending ban on the gasoline additive MTBE (methyl tertiary butyl ether), which has polluted drinking water wells up and down the state. Due to concern over price hikes, the state Air Resources Board earlier this year delayed the ban on MTBE one year until the end of 2003. California required refiners to add MTBE to gasoline in the mid-1990’s to reduce air pollution.

Making clean gasoline without MTBE either will require adding expensive ethanol -- which is limited in supply and may not be as clean as today’s gasoline -- or using more petroleum products. Boyd said that that state will have to use the equivalent of between 50,000 and 100,000 additional barrels of oil a day after banning MTBE. Most of that will be needed in Southern California.

To meet the shortfall, the state will have to purchase blend stocks from the East Coast, which are limited in supply and likely to be expensive, according to Boyd. “Demand does not show any sign of reduction,” he said. “There’s a world-wide squeeze on gasoline.”

From California Environment Report. For more information go to www.southlandreports.com.