Last Friday the Office of Management and Budget finalized the Environmental Protection Agency’s Tier 3 gasoline regulation. Even if you aren’t intimately familiar with the rulemaking process, that last sentence should sound some internal alarm bells:

1)    EPA – nothing good comes out of this EPA. Nothing.
2)    Regulation – how the Obama Administration implements policies Congress rejects
3)    Friday – the day politicians/governments/businesses announce bad things. If you are going to fire someone, you do it on a Friday. If the EPA is going to increase the cost of gasoline for every American…they do it on a Friday. Fridays are scary.

EPA just increased the price of gasoline by 9 cents
As you would imagine, gasoline is a heavily regulated fuel.

EPA determines much of the manufacturing process by requiring strict emissions standards for refiners. EPA also determines the makeup of gasoline by setting numerous blending requirements refiners must meet. For example, EPA makes refiners annually put over 13 billion gallons of corn-based ethanol in gasoline – this mandate, known as the Renewable Fuels Standard, means that about 10 percent of every gallon of gasoline is corn-based ethanol.

EPA also determines the emissions byproduct of gasoline, like how much sulfur can be released into the air. More formally, the sulfur emission regulations are called “Tier rulemakings” with the EPA just releasing its third installment titled, Tier III.

The previous – and recent – Tier II rulemaking reduced sulfur emissions by 90 percent from 300 ppm (parts per million) to 30 ppm. Now, with persistently high gasoline prices, the EPA has decided to once again ratchet down already low sulfur emissions from 30 ppm to 10 ppm.

The American Petroleum Institute has said that this new sulfur regulation will increase the cost of producing gasoline by 9 cents, costs which consumers will bear. A Baker and O’Brien analysis calculates that the regulation will force refiners to spend around $10 billion to comply with the rule and an additional $2.5 annually to maintain compliance. All of this means higher gasoline prices for drivers.

Additionally, the EPA writes that the regulation is “is expected to decrease employment in the vehicle manufacturing sector.” That doesn’t sound good, either.  

Next time you hear the EPA, or any other federal agency for that matter, is going to tell you something on a Friday, reach for your wallet.

Posted by Chris Prandoni on Monday, April 1, 2013 2:20 PM EDT

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