Copyright 2002 The San Diego Union-Tribune  
The San Diego Union-Tribune
October 1, 2002, Tuesday
SECTION: BUSINESS;Pg. C-1

LENGTH: 626 words

HEADLINE: Group warns of soaring gas prices; Cost may reach $3 a gallon

BYLINE: Frank Green; STAFF WRITER

BODY:
Motorists in San Diego County and the state, who already pay about 20 cents a gallon more for gas than their counterparts across the United States, may soon see their fuel bills balloon even more.

A new report by the Natural Resources Defense Council warns that a shortage in refinery capacity in California will force the state to increase pricey fuel imports by more than 800 percent in coming years.

The shortfall -- which will be exacerbated by a population boom and growing demand for fuel -- could spike gasoline prices to the $3-a-gallon level, asserts the report, citing forecasts made by energy consultants for the state.

"California is in for gas pains if it doesn't reduce its oil dependence," said Roland Hwang, a policy analyst at the San Francisco-based nonprofit environmental group.

Hwang noted that California already imports 30,000 barrels of gasoline a day because of inadequate refinery output, which costs drivers about 15 cents a gallon.

But with the state's population estimated to grow by 14 million by 2020, total demand for gas will jump by as much as 30 percent and increase the amount of imported fuel needed to fill the gap to 280,000 barrels a day, the NRDC said.

The report reflects many of the views on potential gas shortages held by the oil industry, which is also concerned that the state's switch from the gasoline additive methyl tertiary butyl ether to corn-based ethanol by the end of next year could cut refinery output by 5 percent.

Both MTBE and ethanol help cut air pollution, but MTBE can pollute water supplies and may cause cancer.

The industry also worries that there could be shortages of ethanol supplies from the Midwest.

"Without an Environmental Protection Agency waiver on oxygenates (such as MTBE and ethanol), we need to do everything we can to increase capacity," said Anita Mangels, a spokeswoman for the Western States Petroleum Association trade group.

But what measures should be taken "is the $64,000 question," she said.

The California Energy Commission, a state agency, is studying the merits of creating a state fuel reserve and the construction of a $1 billion gasoline pipeline out of Texas to curb expected shortages.

California has 13 refineries, down from 26 two decades ago.

The old facilities were closed because of the state's strict environmental laws, which likely would block the building of any new refineries, say oil industry analysts.

The NRDC opposes construction of new refining sites because "we'll pay with more pollution and run afoul of state and federal clean-air requirements," Hwang said.

In its report, the NRDC recommends a four-step plan -- including raising the fuel-efficiency standards of cars in the state -- that it said would save drivers $28 billion by 2020.

Among the NRDC's other proposals:

[] Invest in a hydrogen fuel infrastructure, including tax incentives or grants to help finance construction of a hydrogen-fueling network to power fuel-cell vehicles.

[] Launch a public education campaign promoting gas-saving measures such as fuel-efficient tires and driving at the speed limit on highways.

[] Encourage smart growth, such as new development in urban areas and around transit stations, and increase the availability of mass transit systems, which could save about 45,000 barrels of gas a day.

The average price of a gallon of unleaded regular in San Diego County on Friday was $1.624, down from $1.639 a week earlier, according to a survey by the Utility Consumers' Action Network.

Meanwhile, U.S. retail gasoline prices rose to $1.413 a gallon yesterday, up 1.8 cents from the previous week, the Department of Energy reported.

Frank Green: (619) 293-1233; frank.green@uniontrib.com



LOAD-DATE: October 3, 2002