COVID-19 Silver Lining – Low Gasoline Prices – But at What Cost?
Fri Apr 17th, On Rulemaking and Legislative Practice, by Kimberly Bick
If you live in California, you may have noticed the steep decline in prices at the pump. You can thank the U.S. EPA for that.
Every spring, gas prices seem to skyrocket. The difference between summer- and winter-grade gasoline involves the Reid Vapor Pressure (RVP) of the fuel. RVP is a measure of how easily the fuel evaporates at a given temperature. The more volatile a gasoline (higher RVP), the easier it evaporates. Winter-blend fuel has a higher RVP because the fuel must be able to evaporate at low temperatures for the engine to operate properly, especially when the engine is cold. Summer-blend gasoline has a lower RVP to prevent excessive evaporation when outside temperatures rise. Reducing the volatility of summer gas decreases emissions that can contribute to greenhouse gasses and smog.
Summer-blend is more expensive to produce and that cost is passed on at the pump. The changeover requires significant work at refineries. The switch between the two fuel grades only happens in the fall and the spring. Typically, parties upstream of retailers and wholesale purchasers would be required to stop selling the winter gasoline remaining in their storage tanks on May 1, 2020. But many of those storage tanks will still be full then, which would prevent loading summer gasoline into the storage tanks, resulting in a shortage of gasoline. This spring, due to COVID-19, the switch is now delayed from May 1 to May 20.
The COVID-19 pandemic has caused a fall-off in gasoline demand. As a result of less usage, there is more of the cheaper winter-grade, high volatility gasoline still in storage. More time is needed to sell off that stored fuel before there can be a transition to the more expensive summer-grade, low vapor pressure gasoline. Because of that needed extra transition time, EPA has temporarily waived the summer low volatility requirements and blending limitations for gasoline.
By waiving the low volatility and blending limitations through May 20, EPA will ensure a steady supply of gasoline. EPA will continue to monitor the adequacy of gasoline supplies and, should conditions warrant, may modify or extend this waiver at a later date.
Environmental NGOs may challenge EPA’s waiver of the summer fuel requirements through May 20. The environmental lawyers at Bick Law LLP will continue to follow EPA’s ongoing monitoring of the fuel storage and transition process, as well as any future challenges.