Ethanol Switch Causes Some Gasoline Pumps to Run Dry (Update2)
2006-04-21 12:04 (New York)
(Adds Energy Department analyst in third paragraph.)
By Robert Tuttle
April 21 (Bloomberg) -- At least six service stations in
the U.S. mid-Atlantic region were out of fuel yesterday because
of a region-wide changeover to ethanol-blended gasoline,
according to the AAA, the nation's largest motoring club.
The switchover is part of a nationwide phase-out by May of
the additive MTBE, or methyl tertiary butyl ether, in
reformulated gasoline.
``The problems are scattered, they are transitional and
they will probably run their course over the next two weeks,''
said Mike Burdette, a senior analyst at the U.S. Energy
Department's Energy Information Administration. ``There are no
widespread outages'' of ethanol-blend gasoline or ethanol, he
said.
The filling stations were located in the Philadelphia and
Wilmington, Delaware, regions, AAA spokesman Geoff Sundstrom
said. Service stations and fuel terminals can't move to ethanol-
based fuel until they empty and clean their tanks, a process
that can take as long as two days, he said.
``This is related to the conversion from MTBE to ethanol,''
said Jeff Lenard, spokesman for the National Association of
Convenience Stores, a trade organization representing more than
2,200 retail outlets. ``It is not necessarily the same thing as
supply outages.''
Dallas Service Stations
As many as 60 Dallas-area service stations ran out of
gasoline in early April because tanker trucks that would
normally be available to re-supply them were used to haul
ethanol, according to Valero Energy Corp. spokeswoman Mary Rose
Brown.
The rising price of crude oil and concern about the switch
to ethanol pushed gasoline futures to $2.2394 on the New York
Mercantile Exchange on April 19, the highest closing price in
more than six months.
The average U.S. pump price for regular gasoline has risen
14 percent this month to $2.855 a gallon as of yesterday, up
from $2.218 a year ago, according to AAA's Web site.
Most refineries will have phased out the gasoline additive
MTBE, or methyl tertiary butyl ether, by May and replaced it
with ethanol in reformulated gasoline. Unlike MTBE, which can be
mixed with gasoline at the refinery, ethanol must be shipped
separately by rail, truck or barge and blended with gasoline at
local terminals.
The U.S. Energy Department in February predicted tight
supplies and ``volatile'' prices in the East Coast and Texas
because of the switch to ethanol.
Energy Bill
The switch to ethanol from MTBE came after last year's
energy bill removed the requirement that gasoline contain
oxygenates, which aid combustion and reduce pollution. Some
refineries said the oxygenate requirement shielded them from
liability suits related to groundwater contamination caused by
MTBE. That provision of the energy bill takes effect May 6.
The move toward ethanol also comes at the time of year when
the gasoline market switches to summer-grades of fuel from
winter blends.
Lee Raymond, former chairman of Exxon Mobil Corp., the
world's largest oil company, said government regulations
regarding the composition of gasoline were partly to blame for
high prices.
The government was told that if the move away from MTBE
came during the switch to summer grades of gasoline, ``with the
limited capacity that every service station has, we are going to
end up having an apparent shortage of gasoline,'' Raymond said
at an energy forum at Columbia University in New York on April
19. ``And it's exactly what's happened.''
--With reporting by Matthew Leising in New York. Editor: Banker.
Story illustration: For a chart showing gasoline futures prices,
see {HU1 <Cmdty> GP <GO>}. For news related to gasoline, see {NI
GASOLINE <GO>}. For news related to refining disruptions, see
{NI REFOUT BN <GO>}.
