Following months of bureaucratic wrangling and a final-hour compromise with environmentalists, the Energy Department yesterday put into effect a regulation that would allow oil companies to increase gasoline prices by nearly 2 cents a gallon in the next few weeks.
DOE's long-expected ruling, targeted at increasing supplies of unleaded gasoline, comes on the heels of a statement Wednesday by Energy Secretary James R. Schlesinger that the price of unleaded gasoline could rise to $1 a gallon in a year.
Schlesinger also told a congressional committee that while the total absence of controls on gasoline was preferred by the DOE and the industry, it was "unlikely" during the Iranian oil shutdown, which has sent petroleum prices sharply up.
"By allowing the oil companies a realistic recovery of actual costs, we expect that they will add to their unleaded gasoline production capacity," said Douglas G. Robinson, an official with Doe/'s Economic Regulatory Administration.
Gasoline is the only petroleum product still under price controls, although under DOE's pricing rule issued yesterday,oil companies will be allowed to "tilt" more of the costs they pass through in refining operations onto gasoline. DOE's so-called gasolinetilt ruling alone would result in an increase of gasoline prices by nearly two cents this year and a total of 3.4 cents over the next two years, according to a study completed before the Iranian oil aqueeze.
Schlesinger told a Senate Appropriations subcommittee yesterday that while unleaded gasoline prices could go up to $1 a gallon in a year, "We are looking at prices near the end of the year for leaded gasoline of 75 cents a gallon." Schlesinger also said that the recent, sharp price increases by some oil cartel members could push gasoline prices up a total of 10 cents to 15 cents this year, instead of the 7 cents forecast after the cartel's December price hike.
The Environmental Protection Agency had argued against the DOE's gasoline ruling, saying that because it widened the price gap between unleaded and leaded gasoline -- now about 5 cents a galon -- consumers would burn leaded in place of unleaded gasoline. As a result, the EPA said, catalytic converters that reduce air pollution in recent-model cars would be ruined.
According to a compromise between the DOE and the EPA, however, the Energy Department will issue a proposed ruling later this month that could limit the price difference between leaded and unleaded gasoline. Even then, according to Clarence Ditlow of the Center for Auto Safety, "With a 5-cent-a-gallon difference there will still be a 10 percent switch-over to leaded gasoline, while the oil industry reaps higher profits."
While the DOE was issuing its final gasoline ruling, there was favorable news on the international oil market. Venezuela, which recently raised its fuel oil prices nearly $2 a barrel, announced it would not impose a $1.20-a-barrel surcharge on its 1.1 million bar-barrels a day of crude oil sales.
Meanwhile, Sen. Henry M. Jackson (D-Wash.) issued a 90-page staff study of Mexico that concludes that while that country has "awesome" oil and gas reserves, no country "can rely on Mexico as a short-term source of large quantities... of exports."
In a related development, Canada's National Energy Board said Wednesday it has 2 trillion cubic feet of natural gas it could export to the United States over the next eight years. The U.S. consumes 20 trillion cubic feet of gas a year.