The national debate over energy policy has focused on strategies to reduce the nation’s reliance on imported crude oil and on protecting the environment. Both priorities have a direct effect on motor fuel supplies and prices and have been used by advocates to promote renewable fuels and non-liquid alternative energy resources. Several issues are under consideration in Washington that may affect this market:
- Corporate Average Fuel Economy (CAFE) Standards – The auto manufacturing industry and President Obama reached an agreement to increase average fuel economy standards from 27.5 mpg today to 35.5 mpg in 2016 to 54.5 mpg in 2025. The new standards will trigger changes in vehicle technology and consumer demand for fuel.
- Climate Change – The Environmental Protection Agency is drafting regulations to control emissions of six greenhouse gases it has found to pose a danger to public health and the environment.
- Low Carbon Fuel Standard – The Federal government has not proposed a LCFS for the nation, but California is implementing one and the northeastern states are considering a regional standard to reduce the carbon intensity of transportation fuels.
- Ozone Standards – EPA is preparing new regulations to lower the permissible standards for ozone concentrations in the atmosphere. The proposal would result in nearly all counties monitored for ozone to be classified as non-attainment. EPA has resisted congressional pressure to cease its rulemaking, which is occurring two years sooner than mandated by the Clean Air Act and before the last set of standards has been fully implemented.
Widespread Use and Stage 2 – EPA has announced that it will consider on-board vehicle vapor recovery canisters to be in “widespread use” effective June 30, 2013. Under the Clean Air Act, this designation will remove the requirement for retailers in certain ozone The convenience and fuel retailing industry sells 80 percent of the gasoline in America and motor fuel sales represent approximately 70 percent of the industry’s total sales. Consequently, policies that affect the availability and cost of gasoline and diesel fuel will similarly affect the business of NACS members. While many of the costs associated with complying with new regulatory burdens falls upon the refining industry, these costs are passed through to the retailers and ultimately their customers. Experience shows that when wholesale and retail prices increase, the profitability of fuel retailers decreases. The five issues identified above will affect retailers in the following ways:
- CAFE Standards: The improved fuel efficiency will result in a significant reduction in demand for petroleum products and the introduction of non-petroleum-reliant vehicles. Using the administration’s numbers, refined product consumption may decrease by 14.2% by 2025 and, as the fleet turns over, by more than 26%. That could result in an average loss of 20,000 to 40,000 fill-ups per location each year.
- Climate Change: Cost of compliance with greenhouse gas restrictions could be significant, from a fuels and electricity standpoint. Higher fuel costs will be passed through to retailers, as will high prices for electricity. Earlier proposals were estimated to potentially increase fuel costs by 74% and electricity costs by 82%.
- Low Carbon Fuel Standards: The objective of these programs is to remove petroleum from the transportation energy sector by classifying it as more carbon intense and ultimately either taxing or regulating it. California’s program would disadvantage from its market corn-derived ethanol and fuels produced from Canadian crude oil.
- Ozone Standards: Additional regions classified as non-attainment with ozone standards, and those re-categorized into more severe non-attainment levels, leads to regulations requiring cleaner burning gasoline or additional emissions control measures at retail stations. Both increase costs to retailers and motorists.
- Widespread Use: The elimination of Stage 2 vapor recovery requirements will save retailers tens of thousands of dollars in installation and maintenance. NACS is preparing comments to ensure retailers are fully protected between now and implementation and to expedite the repeal of state mandated Stage 2 requirements.
NACS supports production of natural resources used to produce transportation fuels as well as the development and introduction of realistic alternatives that can be sold through convenience stores and are desired by consumers. NACS opposes regulations that unnecessarily restrict production or impose unreasonable costs on energy resources. NACS believes energy and environmental policies can be balanced without sacrificing economic stability.