Having choices in the market is generally a good thing, but only when those choices are the result of demand from consumers. We should have choices because we want choices. When it comes to co-called “boutique fuels” (all the various blends of fuels available at our pumps), most of the choices exist because the government mandates them.
Not surprisingly, when the government tells the market what to sell, consumers end up paying higher prices. Steven Hayward points out that if we ended these mandates for boutique fuels – which are more about manufacturing demand for things like ethanol than environmentalism – we could see some significant reductions in fuel prices:
Quick: How many kinds of gasoline do we use in America? Most people would say three or six: regular unleaded, mid-grade, and premium, along with the ethanol blends of the same that have become nearly universal. The actual number is somewhere above 45, though hard to pin down exactly, according to the Government Accountability Office (GAO). It might even be closer to 70. Thirty-four states use specially blended gasoline, usually during the summer, which is one reason gasoline prices always rise during the “driving season.”
Is this a conspiracy of the evil oil companies to fatten their margins? Mostly no: It’s the product of EPA bureaucrats and the Clean Air Act, stubbornly maintained even though boutique fuels now deliver only marginal reductions in air pollution from cars, if any at all. And it’s a regulation President Obama could clear away if he wanted to. It wouldn’t deliver a large reduction in gasoline pump prices, but even 10 to 15 cents a gallon—a plausible figure for California’s market—would help.
I know, I know. How will ethanol producers survive if we don’t force people to buy their products?
It seems to me that if a particular fuel blend has value for consumers, it will be sold to them. If they don’t want it, it shouldn’t be sold.