Environmental rules blamed for surging gas prices Midwest has nation's highest price gap between regular, reformulated gas

By Larry Sandler and Annysa Johnson of the Journal Sentinel staff Last Updated: May 11, 2000 Gas Price Gap RELATED LINKS:  Graphic: National gas prices

Gas prices are shooting up in Milwaukee and several other Midwestern metropolitan areas, but leveling off elsewhere in the region - leading the Midwest to the nation's widest price gap.

Oil companies blamed the increase Thursday on environmental rules that require use of reformulated gas in major metropolitan areas. But state and federal officials questioned the size of the jump, and U.S. Rep. Tom Barrett (D-Wis.) suggested oil companies may be using the rules as an excuse to pump up their profits.

Prices in the Milwaukee area are surging as high as $1.69 a gallon, even though the statewide average was $1.42 a gallon for regular unleaded gasoline at self-service pumps earlier this week, said Ernie Stetenfeld, a Wisconsin spokesman for the American Automobile Association. The statewide average was down a penny from last month.

Southeastern Wisconsin and northeastern Illinois are two of the 17 metro areas required to use reformulated gas to cut down air pollution. Together, those areas account for one-third of the gas used nationwide, said George Gaspar, managing director of petroleum research at Robert W. Baird & Co.

Reformulated gas has been "one of our most effective weapons in the fight against smog," said Lloyd Eagan, air management director for the state Department of Natural Resources. The fuel has exceeded its goal of cutting emissions by 25%, added John Mooney, a U.S. Environmental Protection Agency spokesman in Chicago.

Tougher reformulated gas regulations took effect this year, and the summer version of the fuel is just reaching the market.

The EPA predicted second-phase reformulated gas would cost 1 or 2 cents more per gallon than the old reformulated gas. The oil industry says its costs are up a nickel a gallon.

Meanwhile, the difference between reformulated and regular gas was 14 cents a gallon in the Midwest earlier this week, compared with a 7-cent gap on both coasts, the federal Energy Information Administration reported.

Explanations for the increase included the cost of retooling refineries, the use of ethanol, rising crude oil prices, tight gasoline inventories and a reformulated gas patent lawsuit victory by one oil company over the others.

But none of those explanations mattered to disgusted customers at local gas stations.

"It's getting ridiculous. . . . I put 22 gallons in here and it cost me $38," said Paul Mozejewski, nodding toward the Powersweep Inc. truck he was filling at the Speedway SuperAmerica station at Layton and Pine avenues.

Mozejewski paid $1.69 a gallon at the station, 12 cents more than the posted price at the start of the day Thursday.

"This is getting bad," said Mozejewski, who doubted reformulated gas is responsible for the latest price increase. "Pretty soon, it's all going to take its toll - on everything from groceries . . . to a load of dirt, to concrete," he said.

Down the road, at the Airport Amoco at Layton and Howell avenues, Georgie Pasbrig of Plymouth found a bargain at $1.61. But she was kicking herself for not filling up back home.

Pasbrig dismissed the latest price justifications as irrelevant.

"Who cares? With all the things they've done over the years, everything costs more. We're still dying. We're still going to die. So what?" she fumed. "Pretty soon we'll all be trapped in our homes and we won't be able to make a living."

Erin Roth, executive director of the Wisconsin Petroleum Council, said the oil companies he represents had no choice but to raise prices. Refineries had to retool their equipment to produce a new kind of gas, then passed that cost along to consumers, Roth said.

The situation is further complicated by Midwestern demand to use ethanol, instead of the additive MTBE, which pollutes groundwater, said Roth and Dennis Koepke, a DNR economist. That means gas from other parts of the country can't be sold here, even if it would boost supply and ease prices, they said.

Barrett wasn't buying those explanations.

"They (oil companies) have known for, literally, years that there was a requirement to make this gas," he said. "It sounds like an excuse to raise their prices. . . . I want to see if they're suddenly reaping greater profits and blaming it on the government."

Barrett, an advocate of ethanol, said he would investigate its role in the price increase, but wasn't convinced it was responsible.

But U.S. Rep. Paul Ryan (R-Wis.), another ethanol advocate, said Barrett shouldn't be surprised. Ryan said the move to ethanol and the start of second-phase reformulated gas rules produced a predictable price increase.

"We knew all along it would cause a lot of expenditures at refineries," Ryan said. "This is a one-time price shock."

No one was willing to guess how long gas prices would remain high. Stetenfeld and the petroleum council's Roth noted that the first-phase reformulated gas originally cost 8 cents a gallon more than regular gas, but the price gap eventually disappeared as supplies rose and refineries recouped their costs.

"It's likely that this, too, shall pass," Stetenfeld said. "The question is how quickly."

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-- Martin Thompson (mthom1927@aol.com), May 12, 2000