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Boutique Fuel Nonsense

President George W. Bush gave an excellent and comprehensive speech before the Renewable Fuels Association this morning about the fuel cost problems we are having today. He suspended purchases for the strategic oil reserves, and rightly noted that our oil addiction is a national security problem.

Another problem he addressed is the irrational requirements for different fuel blends to be sold in various regions of the country, and he stated that he is easing some of these restrictions.

These blends are known as 'boutique fuels', and they also add to the cost of fuel. Bush addressed this issue succinctly:

When you have an uncoordinated, overly complex set of fuel rules, it tends to cause the price to go up.

Federal law requires reformulated gasoline in the following nine metropolitan areas in order to reduce ozone smog: Baltimore, Chicago, Hartford, Houston, Los Angeles, Milwaukee, New York, Philadelphia, and San Diego. These varying requirements make it difficult for our limited refining capacity (another issue Bush addressed) to efficiently utilize what oil we get, making regions susceptible to unnecessary shortages and expenses. One refinery fire, for example, can spike the price in one region for weeks before refineries are able to plug the gap.

A GAO report released last year lays out the boutique fuels problems:

"The proliferation of special gasoline blends has made it more complicated to supply gasoline and has raised costs, significantly affecting operations at refineries, pipelines, and storage terminals. At refineries, making these blends can require additional investment such as installing new processing equipment and the use of larger amounts of valuable components in the blending process—making it more costly to produce special gasoline blends. Once produced, different blends of gasoline must be kept separate throughout the shipping and delivery process, and the increased number of gasoline blends has reduced the capacity of pipelines and storage terminal facilities, which were originally designed to handle fewer products. For example, several pipeline companies reported that the capacity of their systems has been reduced because they have had to slow the speed of products through the pipelines in order to off-load special blends at specific locations, which raises the average cost of shipping gasoline. Similarly, storage terminals have not been able to fully utilize the volume of their storage tanks because the tanks were designed to handle fewer types of fuel and are often larger in size and fewer in number than necessary for handling smaller batches of special gasoline blends. Further, the proliferation of special blends has, according to several buyers from these wholesale markets, limited the number of suppliers of some of these fuels, posing challenges when traditional supplies are disrupted, such as during a refinery outage or pipeline delay. In the past, local supply disruptions could be addressed relatively quickly by bringing fuel from nearby locations; now, however, additional supplies of special gasoline blends may be hundreds of miles away."

Thanks to Knowledge Problem for this quote, and for this map showing the crazy patchwork of fuel requirements:

Source: Exxon-Mobil

Boutique fuels: a dumb idea that needs to go.

Posted by Ken McCracken · 25 April 2006 11:22 AM


Ken...You are brilliant!

Posted by: Zsa Zsa at April 25, 2006 11:29 AM

Oh no, but it's big oil's fault. C'mon Ken, if you keep this up people won't blame us and they might actually blame themselves for ridiculous levels of consumption.

Posted by: Rob B. at April 25, 2006 12:56 PM

Big oil is the pusher selling to the addict . . .

Posted by: Ken McCracken at April 25, 2006 01:41 PM

that damn Bush!

Posted by: christian at April 25, 2006 02:48 PM

I blame US consumers...

Posted by: Hoodlumman at April 26, 2006 12:52 PM

I have the perfect solution to this problem.

Posted by: rightwingprof at April 26, 2006 01:17 PM