Gasoline futures plunge on news EPA may require fewer additives

California sought waiver in light of soaring prices

April 02, 2004|By BLOOMBERG NEWS

NEW YORK - Gasoline futures plunged to a three-week low yesterday after the U.S. government said it may exempt California from requirements for cleaner-burning gasoline.

California and New York have asked for temporary waivers from federal rules requiring gasoline to be blended with oxygen-rich components. Waivers would make it easier for refiners to make fuel to meet higher motorist demand during the peak driving months of summer. Pump prices are already at record highs.

"We'd probably see more imports, we'd see cheaper blending costs, we'd see cheaper transportation costs," said Carl Larry, vice president of global energy sales for ABN Amro Inc. in New York. "It would eventually cause a bigger supply of gasoline."

Gasoline for May delivery tumbled 5.91 cents, or 4.3 percent, to $1.0759 a gallon on the New York Mercantile Exchange, the lowest closing price for a future contract since $1.0702 on March 10. May futures fell 1.5 cents yesterday.

Federal rules require oxygenates such as ethanol or methyl tertiary butyl ether, known as MTBE, to be added to gasoline sold in the most-polluted areas to make fuel burn more completely.

The Environmental Protection Agency "is seriously looking at" California's request for a waiver, Energy Secretary Spencer Abraham said in testimony yesterday before the House Energy and Commerce Committee.

"It's my understanding the EPA is seriously looking at this request," Abraham told the panel.

The prospect that exemptions to federal fuel regulations would avert supply shortages triggered selling by speculators, such as managed commodity funds, in gasoline futures and other NYMEX markets, traders said.

"That the EPA is even entertaining the thought is putting tremendous fear into those holding long positions," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, a fuel marketer.

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