MORE CONFUSION IN THE GASOLINE MARKETS DUE TO EPA WISDOM REGARDING MTBE.  WILL THE EPA BE ACCUSED OF "PRICE GOUGING" ?

News  and Opinion Item Submitted by Steven P. Zody, principal of Zody Geoscience and Rustic Resources, Wooster, OH 44691

     The EPA mandated the use of MTBE as part of their grand reformulated gasoline plans (regulations) in 1992 and 1995....... now this, just when we need to develop a comprehensive national energy policy. How's about some science folks?!  I'm sure the oil industry will still be accused of  "price gouging" by the Al Gore's of the world who politically mandated these moves with "junk science."

Aug. 31 /PRNewswire/ via NewsEdge Corporation -

     California's decision to ban MTBE as of January 1, 2003 appears to be proceeding as planned. MTBE continues to come under political fire as a gasoline component, and a number of other states and the EPA have announced their intentions to restrict or eliminate the future use of MTBE. These developments increase the uncertainty regarding the continued use of MTBE in U.S. gasoline. The rest of the world looks on with high interest but still considers MTBE a valuable gasoline component, and has not yet moved against MTBE to the same degree as the U.S.

     To better understand the potential implications of restrictions on MTBE use, energy consultants, Purvin & Gertz, Inc., and petrochemical consultants, Chemical Market Associates, Inc. (CMAI), have collaborated on a joint study entitled "MTBE Phaseout -- Global Impact on the Petroleum & Petrochemical Industries." Due to the current uncertainty in future MTBE regulations, the study researches three potential scenarios. These range from a "Phaseout" scenario with a complete MTBE ban by 2005 throughout the U.S., to a "Status Quo" scenario with a California-only ban and no change in Federal regulations.

    According to Blake Eskew, Senior Principal with Purvin & Gertz, the U.S. refining industry has developed a substantial reliance on MTBE, particularly on the East Coast and West Coast. If MTBE use is eliminated, refiners will have to compensate for the loss of its octane, volume, and other properties through expansion of refining facilities and higher-cost processing operations. At the same time, the current Federal program to reduce the sulfur content of all U.S. gasoline will require significant refining investment. Increases in refining costs and the tighter gasoline supply/demand balance will have their greatest impact on gasoline prices and octane values in the U.S. market, with further effects in other world markets.

     Chris Geisler, CMAI Project Manager, Proprietary Services, expects that significant impacts on the global petrochemical industry will follow if MTBE use is phased out in U.S. gasoline. North American MTBE and methanol producers will be hard hit with world trade significantly impacted as a result of reduced demand. Increased octane values will drive propylene, butylene and aromatics prices higher. Regional differences in octane values could affect U.S. petrochemical producer's competitiveness in world markets.

     The "MTBE Phaseout -- Global Impact on the Petroleum & Petrochemical Industries" is available in book or CD-ROM format.

     Founded in 1947, Purvin & Gertz is an independent consulting firm providing technical, commercial and strategic advice concerning the oil, gas, chemical and power generation industries. Purvin & Gertz specializes in serving clients involved in the production, processing, transportation and marketing of crude oil, petroleum products, natural gas and gas liquids.  CMAI is a petrochemical consulting firm servicing a wide range of companies all over the world. With expertise in all facets of the chemical business, CMAI, since 1979, is recognized for its market analyses based on extensive databases, technology evaluations, and project feasibility studies in the worldwide petrochemical, plastics, fibers and chlor-alkali industries. For more information on the "MTBE Phaseout -- Global Impact on the Petroleum and Petrochemical Industries", visit CMAI's website at www.cmaiglobal.com or Purvin & Gertz' website at www.purvingertz.com.

Submitted 9/5/00

     For comments regarding the impact on refiners of the EPA proposal to limit vehicle sulfur emissions to 15 ppm, please see John Powell's report on the "From the Trenches" webpage.