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A Project of The Annenberg Public Policy Center

Gingrich’s Inflated Gasoline Claim

Newt Gingrich exaggerates when he says the Environmental Protection Agency has a proposal “that would raise the price of gasoline by 25 cents a gallon.” Gingrich’s cost estimate comes from an oil industry study of “clean gasoline” recommendations made by U.S. automakers. The EPA has yet to issue a proposal, and a top agency official says the oil industry study is based on proposals more stringent than those being considered by the EPA.

In addition, there are competing studies that show the possible EPA rule changes would have far less of an effect at the gasoline pump.

What’s the EPA Plan?

The EPA is under orders from President Barack Obama to review tailpipe emissions from passenger cars and light trucks — the so-called Tier 2 fuel standards that were finalized in 1999 under President Bill Clinton and implemented in 2004 under President George W. Bush.

The EPA says it expects to issue the so-called Tier 3 emission and fuel standards in March.

Although the EPA has yet to issue regulations, Republican presidential candidate Newt Gingrich twice on the Sunday talk shows criticized the EPA for planning to raise gasoline prices by 25 cents a gallon.

Gingrich, “Meet the Press,” Feb. 5: His policies have consistently, I think, weakened the country. He has an Environmental Protection Agency proposal that would raise the price of gasoline by 25 cents a gallon. There are very few Americans who want to see the price of gasoline raised by government to 25 cents a gallon.

Gingrich, “Face the Nation,” Feb. 5: Every time you turn around, the Obama administration, which has a plan by the way at the Environmental Protection Agency to add twenty-five cents a gallon to every gall– gallon of gasoline at a time when it’s already the highest price in history.

We contacted the Gingrich campaign to get more information about his claim, but it did not get back to us. However, the former House speaker is clearly referring to the cost estimates contained in a July 2011 report prepared by Baker & O’Brien, an energy consulting firm, for the American Petroleum Institute. The oil industry-funded report has been cited by others wary of what the EPA will do and how it will impact the industry and motorists.

On Jan. 12, six senators from oil-producing states wrote a letter to the EPA expressing concern about the expected Tier 3 regulations. In particular, the senators — two Democrats and four Republicans — said they opposed reducing the sulfur levels in gasoline from 30 parts per million to 10 parts per million, citing the potential cost to the oil industry and motorists.

Letter to EPA, Jan. 12: While we certainly support reducing air pollution, experts suggest it will be expensive to remove additional and de minimis amounts of sulfur from fuel. In fact, a recent study conducted by Baker & O’Brien, a professional consulting firm, estimates that capital and annual operating costs associated with implementing a standard of 10 ppm per year could be $17 billion and $13 billion respectively. Depending on the stringency of the proposed rule, that could add 12 to 25 cents to each gallon of gasoline.

But there are several pitfalls in using the Baker & O’Brien study to claim that the EPA will add 25 cents per gallon to the cost of gasoline (Gingrich) or that mandating low-sulfur gasoline will add 12 to 25 cents per gallon (the six senators).

Most important, Baker & O’Brien did not study an EPA proposal. The report was in response to a June 2009 proposal by the Alliance of Automobile Manufacturers to create a “national clean gasoline.” The oil industry report considered four potential scenarios to assess the impact of the automakers’ proposal for lower sulfur and Reid vapor pressure, or RVP, a measure of the volatility of gasoline. (The automakers support uniform national gasoline standards rather than having some states, such as California, operate under different standards. The automakers support lower sulfur levels in particular to improve the efficiency of catalytic converters and make it easier and less costly to comply with other EPA regulations.)

Also, the automakers’ proposal is far more stringent than what the EPA is considering for both sulfur and RVP. That’s according to Margo Oge, director of EPA’s Office of Transportation and Air Quality. Oge spoke Jan. 26 at the Washington Auto Show and answered critics who cite the Baker & O’Brien study as proof that the EPA will add up to 25 cents per gallon to the cost of gasoline.

InsideEPA, Jan. 26: But Oge said that the Baker & O’Brien study is based on costs of a program “EPA is not planning to propose,” specifically saying that the agency is “not planning to propose” the “very low levels” of RVP assumed in the study.

Oge also criticized the study’s assumptions about sulfur limits, saying that it made assumptions about EPA’s sulfur cap that are “very different” than what EPA is planning to propose.

The assumptions in the Baker & O’Brien study also differ from those used in other studies. One of those studies was conducted by MathPro Inc. for the International Council for Clean Transportation, a nonprofit that provides research “to benefit public health and mitigate climate change.” MathPro studied “standards that EPA might consider in its forthcoming rule-making on Tier 3 gasoline,” specifically these three possibilities:

  • Reducing sulfur level from the current average level of 30 ppm to 10 ppm. Added cost: 1.4 cents per gallon.
  • Reducing average sulfur level to 10 ppm and reducing RVP year-round from 10 to 9 psi. Added cost: 2.5 cents per gallon when the extra costs are allocated to the entire gasoline pool and 5.3 cents per gallon when applied only to summer gasoline.
  • Reducing average sulfur level to 10 ppm and reducing RVP year-round from 10 to 8 psi. Added cost: 3.9 cents per gallon when the extra costs are allocated to the entire gasoline pool and 10.2 cents per gallon when applied only to summer gasoline.

Dave Hirshfeld, a coauthor of the MathPro report, said the differences in cost estimates, compared with the oil industry report, can be attributed to different assumptions and analytical methodologies.

For example, refineries must remove certain gasoline components — such as butanes and pentanes — to further reduce gasoline RVP, as they do now for summer fuels to prevent gasoline vapors from escaping storage tanks and fuel lines during the ozone season. The Baker & O’Brien report assumes that gasoline components rejected for use in low RVP gasoline would have to be exported or burned rather than reused. The MathPro report assumes such components can be stored and used in the winter — a “standard practice,” Hirshfeld said, in some states now.

Also, the Baker & O’Brien report considered the cost of lowering the RVP to 7 psi, as proposed by the automakers, in two of its four potential scenarios. But Hirshfeld and Oge, the EPA official, both said that that was unlikely to happen. Hirshfeld said lowering gasoline volatility to that level would be cost prohibitive. “I’m not sure the EPA will do anything about RVP,” Hirshfeld said.

If the EPA lowers sulfur levels but not RVP standards, then the cost at the pump will be even less. How much less? One group — the National Association of Clean Air Agencies — claims that reducing the average sulfur level to 10 ppm will add “less than a penny per gallon.”

Bottom line: We won’t know until the EPA announces its Tier 3 proposal in March what the agency will do and how much it could potentially cost. There’s agreement that the EPA will do something and that it will cost more, but how much more is in dispute.

This much, though, is clear: Gingrich’s claim that it will add 25 cents per gallon is an exaggeration unsupported by the facts.

— Eugene Kiely