Cleaner-burning gasoline not a major factor in gas price increases, ARB is told.

SACRAMENTO, Calif.--(BUSINESS WIRE)--April 26, 1996--Members of the California Air Resources Board (ARB) were told Thursday that California's cleaner-burning gasoline is not a major factor in the recent increases in gasoline prices that have angered California motorists.

Board members supported continuation of the cleaner-burning gasoline program but agreed to leave open the possibility of modifying the program if fuel-supply shortages occur. The board discussion came after a day-long informational hearing on gas prices that included testimony from oil company executives, the chairman of the California Energy Commission and many others.

"The considerable amount of testimony at this hearing indicates that cleaner-burning gasoline is doing just what we asked -- removing 300 tons a day of health-threatening pollutants from our skies at only a modest cost to California motorists," ARB Chairman John D. Dunlap said.

"Californians currently are paying an extra five to eight cents a gallon for cleaner, healthier air. The rest of these outrageous price hikes reflect events within the state, national and global oil markets that are unrelated to California regulations. After listening to the oil industry's testimony, I still have not heard anything that fully explains these price increases," Dunlap said.

The board directed ARB staff to work with the California Energy Commission to determine whether a temporary suspension of California regulations would produce lower fuel prices and ease supply constraints. The board also authorized the ARB executive officer to temporarily modify the cleaner-burning gasoline regulations should he and the Energy Commission determine that such an action would be effective.

"We are willing to modify our fuel regulations if it would truly help ensure that Californians have adequate fuel supplies at reasonable prices," Dunlap said.

"But it would be a travesty if the industry's short-term focus on profits were to jeopardize a program that is already removing toxins and hazardous pollutants from our air and is making California a healthier place for ourselves and our children."

If necessary, ARB could allow the temporary importation of non-California gasoline not meeting all ARB requirements but still meeting federal clean-fuel specifications, Dunlap said. The ARB staff was directed to determine the environmental and economic impacts that any future variance or suspension of the fuel regulations might have in California.

Executives of the 10 major oil companies doing business in California testified that sharp rises in crude-oil prices are primarily responsible for the rapid increase in gasoline prices in California and throughout the United States.

Crude oil prices have risen 50 percent (or the equivalent of 20 cents per gallon of gasoline) in 1996 because Iraqi crude oil did not appear on the world market this spring as expected, and because the unusually cold winter in much of the United States caused high demand for heating oil.

The oil executives also cited the increased demand for gasoline that typically occurs in spring and operating problems at several California refineries as reasons for the price increases.

Damage from an April 1 fire at the Shell refinery in Martinez has greatly tightened fuel supplies in California, but this should be remedied within a few days as Shell resumes production and shipments of cleaner-burning gasoline arrive from outside California, they said. The Shell refinery produces about 10 percent of the gasoline used in California.

The introduction of cleaner-burning gasoline, which costs slightly more per gallon to make than traditional, higher-polluting gasoline, was cited as an additional factor in the price increases. Energy Commission Chairman Charles Imbrecht testified at the hearing that cleaner-burning gasoline currently is adding only five to eight cents a gallon to gasoline prices.

The high crude-oil prices also have pushed up diesel prices throughout the nation, the oil executives said. Diesel prices rose sharply in late March following equipment problems at ARCO's Carson refinery, but in-state diesel production is now above normal. Prices have remained high because of heavy diesel use by farmers during the spring planting season, according to the oil executives.

ARB regulations required California refineries to produce cleaner-burning gasoline by March 1. All refineries met the deadline, and cleaner-burning gasoline now is being used throughout California. While retail service stations are not required to sell it until June 1, virtually all California service stations have been selling cleaner-burning gasoline since mid-March.

The gasoline, which contains lower levels of toxics and other high-polluting substances, reduces smog-forming emissions from motor vehicles by 15 percent and reduces cancer risk from exposure to gasoline toxics by 30 to 40 percent. The clean-air benefits are comparable to removing 3.5 million motor vehicles from California's roads.

The Air Resources Board is a department of the California Environmental Protection Agency. ARB's mission is to promote and protect public health, welfare and ecological resources through effective reduction of air pollutants, while recognizing and considering effects on the economy. ARB oversees all air pollution control efforts in California to attain and maintain health-based air quality standards.

For more information about cleaner-burning gasoline, please access the ARB website at http://www.arb.ca.gov/

CONTACT: California Air Resources Board, Sacramento

Daven Oswalt, 916/327-6247

Allan Hirsch or Jerry Martin, 916/322-2990