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Report Foresees $3 Prices at Pump

Energy: Environmental group says phasing out MTBE in gas will lead to a 5% decline in supplies.


California motorists could see gasoline prices spike to near $3 a gallon in the next few years unless the state substantially reduces its demand for oil, according to an environmental group.

In a report being released today, the Natural Resources Defense Council says California's refinery capacity will be unable to keep up with demand because of population growth and other factors, including the state's planned phaseout of the additive MTBE, or methyl tertiary butyl ether.

Ending the use of MTBE, which is added to make gasoline burn cleaner but contaminates ground water, will reduce refinery output by 5%, the report says, and that will have to be made up from out-of-state gasoline suppliers.

The state's refineries already are operating near their capacities, and construction of new ones is unlikely because of clean-air rules and other regulatory hurdles, a spokesman for the environmental group said.

Claudia Chandler, assistant executive director of the California Energy Commission, termed a 5% decrease in supplies significant.

"The gasoline lines of the '70s were caused by a 5% disruption," she said.

The state currently imports about 30,000 barrels of gasoline a day to augment supplies that cannot be provided by local refineries, the report says.

"It will be tougher and tougher to get imported supplies of gas," said Roland Hwang, author of the report and a senior policy analyst with the group. "Within the next several years, we're looking at an increased likelihood of a $2-per-gallon average and the real possibility of $3 spikes."

Paul Langland, a spokesman for BP, which sells gasoline in California under the Arco and Thrifty brands, said predicting how much gasoline will cost in the future is tricky because of continuing improvements to oil refinery technology, which could increase production, as well as the uncertain price of oil.

At the same time, he noted that BP is funding significant research into fuel cells and alternative fuels because "everyone understands that the era of the hydrocarbon will come to an end at some time in the future."

To reduce dependence on gasoline, the report proposes that the state give auto makers more incentives to increase the fuel economy of passenger vehicles sold here to 42 miles per gallon by 2015, up from the current average of 24 mpg.

The group also says the state should promote the development of hydrogen-powered fuel-cell vehicles.

The plan further calls for a public education effort similar to the successful "Flex Your Power" campaign and encourages developers and municipal planners to adopt so-called smart-growth policies that include increased use of mass transit and market pricing for parking.

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