EPA relaxes Citgo gas standard to help alleviate price spike
Staff and news services
Published 08/29/01
The Environmental Protection Agency on Tuesday
temporarily relaxed standards on the gasoline sold by Citgo
Petroleum Corp. in the Midwest in order to alleviate a recent
price spike in the region.
The move immediately will increase gasoline supplies in the
Midwest, which has seen prices shoot up after an Aug. 14 fire
shut down a Citgo refinery in Lemont, Ill. Since the fire, Twin
Cities gas prices have risen about 40 cents a gallon, to an
average of more than $1.80 for a gallon of regular unleaded gas
on Tuesday.
It is uncertain how much effect the EPA's decision will have on
prices, because the increased gas supplies will coincide with
increased demand this weekend as more people hit the road for
Labor Day holiday trips, and because the Organization of
Petroleum Exporting Countries plans to cut oil sales by 1
million barrels a day beginning Saturday.
Meanwhile, Sen. Paul Wellstone, D-Minn., on Tuesday called
on petroleum suppliers to step up delivery of gasoline supplies to
Minnesota and the rest of the Midwest to ease the supply
pressures, which will be particularly acute this weekend.
'Minnesotans are tired of price spikes at the pump,' Wellstone
said in a news release. 'But until additional supplies reach
Minnesota, there is little that gas retailers can do. I note that
the fire occurred two weeks ago, which should have been plenty
of time for other refiners and producers to divert additional
supplies here.'
Under the agreement with the EPA, Citgo will be allowed to
market a blend of gasoline to retailers in Chicago and
Milwaukee that meets less-stringent air-quality requirements
for the remainder of the summer driving season. Citgo now will
be able to sell inventories of autumn-grade gasoline, which
normally does not go on sale until Sept. 15.
In exchange, Citgo will pay the Treasury Department 14 cents
for every gallon it sells of the lower-grade gasoline, which is
cheaper to manufacture than the summer-grade product.
Dawn Duffy, public relations manager for the American
Automobile Association of Minneapolis, said the effort is likely
to provide some relief to buyers in Chicago and Milwaukee but
that there's no guarantee of lower prices in the Twin Cities.
'It's a small step in the right direction for that area, but I don't
see how much -- if at all -- it would affect gas prices over
here,' she said.
'All of these refineries are acting as a Band Aid for what those
[closed] refineries are not producing,' Duffy said. 'It just goes to
show you how fragile our energy operations are -- that one fire
at one refinery can affect gas prices in such a large area.'
Before the EPA took action, refiners elsewhere in the United
States and Europe already were working to make up for the
shortfall in the Midwest.
'When prices goes up, that gets the product to the markets
where it's needed and that solves the problem,' said Ed Silliere,
an analyst at Energy Merchant in New York City.
The recent run-up in prices came after prices fell nearly all
summer long.
Wholesale and retail gasoline prices soared last spring on fears
that there wouldn't be enough to meet peak demand. U.S. and
foreign refiners cranked up production to profit from the price
spike, and in doing so, flooded the market with cheap gas that
drove prices back down.
-- Staff writer Jim Buchta contributed to this report.
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