a

GAO

United States Government Accountability Office

Report to Congressional Requesters

June 2005 GASOLINE MARKETS

Special Gasoline 

Blends Reduce 

Emissions and 

Improve Air Quality, 

but Complicate Supply 

and Contribute to 

Higher Prices

GAO-05-421
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-421.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jim Wells, 202-

512-3841 or wellsj@gao.gov. 

Highlights of GAO-05-421, a report to 

congressional requesters 

June 2005

GASOLINE MARKETS

Special Gasoline Blends Reduce 

Emissions and Improve Air Quality, but 

Complicate Supply and Contribute to 

Higher Prices 

Although there is no consensus on the total number of gasoline blends used 

in the United States, GAO found 11 distinct special blends in use during the 

summer of 2004. Further, when different octane grades and other factors 

are considered, there were at least 45 different kinds of gasoline produced in 

the United States during all of 2004. The 11 special blends GAO found are 

often used in isolated pockets in metropolitan areas, while surrounding 

areas use conventional gasoline. The use of special blends may expand 

because a new federal standard for ozone may induce more states to apply 

to use them. To date, the Environmental Protection Agency (EPA) has 

generally approved such applications and does not have authority to deny an 

application to use a specific special blend as long as that blend meets criteria

established in the Clean Air Act. EPA staff told us that there had been recent 

congressional debate regarding EPA’s authority with regard to approving 

special gasoline blends but that the bills had not passed. 

EPA models show that use of special gasoline blends reduces vehicle 

emissions by varying degrees. California’s special blend reduces emissions 

the most—VOCs by 25-29 percent, NOx by 6 percent compared with 

conventional gasoline, while also reducing emissions of toxic chemicals. In 

contrast, the most common special gasoline blend (used largely in the Gulf 

Coast region) reduces VOCs by 12-16 percent and NOx by less than 1 percent 

compared with conventional gasoline. The extent of reductions remains 

uncertain, because they rely, at least in part, on data regarding how special 

blends affect emissions from older vehicles, and these estimates have not 

been comprehensively validated for newer vehicles and emissions controls. 

Regarding air quality, EPA and others have concluded that improvements 

are, in part, attributable to the use of special blends. 

The proliferation of special gasoline blends has put stress on the gasoline 

supply system and raised costs, affecting operations at refineries, pipelines, 

and storage terminals. Once produced, different blends must be kept 

separate throughout shipping and delivery, reducing the capacity of 

pipelines and storage terminal facilities, which were originally designed to 

handle fewer products. This reduces efficiency and raises costs. In the past, 

local supply disruptions could be addressed quickly by bringing fuel from 

nearby locations; now however, because the use of these fuels are isolated, 

additional supplies of special blends may be hundreds of miles away. 

GAO evaluated pretax wholesale gasoline price data for 100 cities and 

generally observed that the highest prices tended to be found in cities that 

use a special gasoline blend that is not widely available in the region, or that 

is significantly more costly to make than other blends. There is general 

consensus that increased complexity, and higher costs associated with 

supplying special blends, contribute to higher gasoline prices either because 

of more frequent or severe supply disruptions or because higher costs are 

likely passed on at least in part to consumers. 

The Clean Air Act, as amended, 

requires some areas with especially 

poor air quality to use a “special 

gasoline blend” designed to reduce 

emissions of volatile organic 

compounds (VOC) and nitrogen 

oxides (NOx) and requiring the use 

of an oxygenate such as ethanol. In 

less severely polluted areas, the Act

allows states, with EPA approval, 

to require the use of other special 

blends as part of their effort to 

meet air quality standards. 

GAO agreed to answer the 

following: (1) To what extent are 

special gasoline blends used in the 

United States and how, if at all, is 

this use expected to change in the 

future? (2) What effect has the use 

of these blends had on reducing 

vehicle emissions and improving 

overall air quality? (3) What is the 

effect of these blends on the 

gasoline supply? (4) How do these 

blends affect gasoline prices? 

What GAO Recommends

GAO is making four 

recommendations to EPA, 

including: (1) that the agency, with 

the Department of Energy and 

others, develop a plan to balance 

the environmental benefits of using 

special fuels with the impacts of 

these fuels on the gasoline supply 

infrastructure and (2) if warranted, 

that EPA work with other agencies 

to identify what statutory or other 

changes are required to implement 

this plan and request those 

authorities from Congress. EPA 

declined to comment on the 

findings and recommendations. 
Page i GAO-05-421 Special Gasoline Blends

Contents

Letter 1

Results in Brief 4

Background 8

Special Gasoline Blends Are Widely Used and Use May Increase in 

the Future 15

Special Gasoline Blends Reduce Emissions and Contribute to 

Improved Air Quality 23

Use of Special Gasoline Blends Has Made It More Complicated and 

Costly to Supply Gasoline 28

Areas That Use Uncommon Special Gasoline Blends Tend to Have 

Higher and More Volatile Gasoline Prices 34

Conclusions 38

Recommendation for Executive Action 40

Agency Comments and Our Evaluation 40

Appendixes

Appendix I: Scope and Methodology 42

Appendix II: GAO Contact and Staff Acknowledgments 46

Table Table 1: Projected Emissions Reductions Resulting from Low-RVP, 

RFG, and CBG Gasoline Blends 25

Figures Figure 1: Gasoline Supply and Demand, September 2004 13

Figure 2: Map of Key Pipelines and Refineries, 2004 14

Figure 3: Special Gasoline Blends—Summer 2004 18

Figure 4: Market Shares for the Various Gasoline Blends Used in 

2001 19

Figure 5: Map of Areas Not Meeting New 8-Hour and Former 

1-Hour Ozone Standard, 2004 21
Contents

Page ii GAO-05-421 Special Gasoline Blends

Abbreviations

AQIRP Air Quality Improvement Research Program 

CBG Cleaner Burning Gasoline

CO carbon monoxide

DOE Department of Energy

EIA Energy Information Administration 

EPA Environmental Protection Agency

FIP federal implementation plan

MTBE methyl tertiary-butyl ether

NAAQS National Ambient Air Quality Standards

NOx nitrogen oxides

OPIS Oil Price Information Service

RFG reformulated gasoline

RVP reid vapor pressure

SIP state implementation plan

VOCs volatile organic compounds

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Page 1 GAO-05-421 Special Gasoline Blends

United States Government Accountability Office

Washington, D.C. 20548

A

June 17, 2005 Leter

The Honorable James Jeffords

Ranking Minority Member 

Committee on Environment and Public Works

United States Senate

The Honorable Barbara Boxer

United States Senate

In 2004, consumers in the United States used approximately 140 billion 

gallons of gasoline, an amount equivalent to approximately 10 percent of 

the world’s total consumption of petroleum products. Despite significant 

improvements in vehicle emissions and fuel efficiency technology, gasoline 

use remains a major source of harmful pollutants such as volatile organic 

compounds (VOC) and nitrogen oxides (NOx), both of which can 

contribute to formation of ground-level ozone—a pollutant linked to a 

variety of health problems including aggravated asthma, reduced lung 

capacity, and increased susceptibility to respiratory illnesses like 

pneumonia and bronchitis.1

 Vehicle emissions also contribute to smog and 

acid rain, which can reduce visibility and damage property. The Clean Air 

Act (the Act), as amended, provides a federal and state framework to 

address air pollution and its health consequences. Among other things, the 

Clean Air Act has required improvements in emissions controls on 

automobiles, power plants, and other significant contributors to pollution. 

Under the Act, the federal government establishes air quality standards for 

several pollutants, including ozone and carbon monoxide. States that do 

not meet these standards must develop plans to improve air quality and 

submit those plans to the Environmental Protection Agency (EPA) for 

approval. 

In 1990, the Clean Air Act was amended to require some areas with poor air 

quality to use “special gasoline blends”—blends of gasoline, designed to be 

cleaner burning. Specifically, the Act requires areas with the worst air 

quality to use “reformulated” gasoline, a special blend of gasoline designed 

to reduce emissions of VOCs and NOx. Reformulated gasoline also 

1

Research by EPA and others has shown that high levels of air pollution are correlated with 

these and other health effects. However, there is insufficient research linking health effects 

to the use of specific special gasoline blends and, as a result, this report does not address 

the health effects of special gasoline blends. 
Page 2 GAO-05-421 Special Gasoline Blends

includes additives such as ethanol, which reduce emissions of carbon 

monoxide in some engines—these additives are called “oxygenates” 

because they increase the oxygen content of the fuel.2

 In less severely 

polluted areas, the Act gives states the option of using reformulated 

gasoline or seeking EPA approval to require the use of other special 

gasoline blends as part of overall efforts to meet federal air quality 

standards. States applying for EPA approval to require the use of a special 

gasoline blend must demonstrate that even with the use of all reasonable 

and practicable options, additional emission reductions are needed to 

achieve federal air quality standards. States also must demonstrate that no 

other measures that would bring about timely attainment exist or that 

existing measures, such as state inspection and maintenance programs, are 

unreasonable or impracticable. Once EPA has determined that these 

criteria are met and has approved a state’s application to use a special 

gasoline blend in a given location, that fuel becomes a requirement. 

Gasoline is a mixture of multiple components. With the exception of 

ethanol and some other additives, these components are produced from 

crude oil through a set of processes collectively known as refining. The 

types and amounts of components in gasoline can be adjusted for a number 

of reasons, such as improving engine performance or reducing emissions. 

As a general matter, special gasoline blends differ from conventional 

gasoline in at least one of three ways: a reduced tendency to evaporate, the 

addition of an oxygenate, or reduced levels of one or more 

chemicals—such as sulfur. In this report, “conventional gasoline” refers to 

the basic gasoline blend used everywhere that a special gasoline blend 

(e.g., reformulated gasoline, state special blends, etc.) is not.

Whatever the blend, gasoline used in the United States is provided by some 

combination of U.S. refineries and/or imports of gasoline or components. 

Most gasoline produced in the United States is refined in one of four major 

refining areas located along the East Coast, West Coast, Gulf Coast, and 

Midwest. From a refining area or coastal terminal, gasoline is shipped 

through a network of pipelines, water barges, or trucks to large storage 

terminals, which may have tanks capable of holding hundreds of millions of 

2

There are two oxygenates commonly in use. Methyl tertiary-butyl ether (MTBE) is derived 

from crude oil and was the most common oxygenate additive until recent years, when it was 

found to contaminate ground water supplies, and has since been banned in a number of 

states. In its place, ethanol has increasingly been used as an oxygenate.
Page 3 GAO-05-421 Special Gasoline Blends

gallons of gasoline. From there, it is distributed to retail outlets such as 

local gasoline stations by large over-the-road tanker trucks. 

Over the past several years, gasoline prices in parts of the United States 

have on several occasions experienced sudden, significant price increases. 

Some areas with unique gasoline blends, such as California and parts of the 

Midwest, have been especially hard hit. Some experts have attributed these 

price increases, in part, to special gasoline blends and have suggested that 

more uniform national gasoline standards could lead to lower or more 

stable gasoline prices while meeting air quality goals. Others, including 

some state governments, believe that special gasoline blends are an 

important tool that has enabled them to meet federal air quality standards 

at lower cost than other alternatives. 

In this context, we agreed to answer the following questions: 

1. To what extent are special gasoline blends used in the United States 

and how, if at all, is this use expected to change in the future?

2. What have EPA and others determined regarding the role of special 

gasoline blends in reducing vehicle emissions and improving overall air 

quality? 

3. What is the effect of these blends on the gasoline supply in the United 

States?

4. How do these blends affect gasoline prices?

In answering these questions, we reviewed federal and state analyses of 

gasoline markets and the environmental effects of various special gasoline 

blends; examined the literature on gasoline supplies and prices; and 

analyzed wholesale gasoline price data for 100 cities and the national 

average. We interviewed a wide range of government officials and industry 

experts including federal officials at the EPA and the Department of 

Energy’s Energy Information Administration; staff at state environmental 

offices; academic and industry experts; petroleum industry officials from 

companies involved in refining, terminal operations, and pipeline 

operations, as well as from large oil companies; and representatives of 

trade associations. We also conducted detailed examinations of markets in 

California, Louisiana, Texas, and New Jersey—states with large refining 

sectors and experience with producing and using special gasoline blends. 

Because many factors may affect gasoline prices at various times, only 
Page 4 GAO-05-421 Special Gasoline Blends

some of which are readily and consistently observable through available 

data, we agreed to report on prices and volatility but not to provide a 

definitive causal link between specific gasoline blends and prices. We 

conducted our work from June 2004 to May 2005 in accordance with 

generally accepted government auditing standards. For a more detailed 

discussion of the scope and methodology of our reiew, see appendix I.

Results in Brief Although there is no consensus on the total number of special gasoline 

blends used in the United States, we found that, in addition to conventional 

gasoline, at least 11 fundamentally distinct special gasoline blends were 

used during the summer of 2004 in parts of 34 states and covering 

approximately one-sixth of all the counties in the United States. In the 

summer of 2001—the last year for which we had data—special gasoline 

blends accounted for slightly more than half of the total gasoline volume 

consumed in the United States, with the rest accounted for by conventional 

gasoline. When different octane grades and other factors are considered, 

there were at least 45 different blends of gasoline produced and handled by 

pipelines in the United States during the entirety of 2004. Special gasoline 

blends are often used in isolated pockets because these blends have 

generally been adopted in large metropolitan areas in response to severe 

air quality problems, while surrounding areas have generally continued to 

use conventional gasoline. Further, EPA’s approvals of individual states’ 

applications to adopt special gasoline blends have been made 

independently over time without consideration of the other fuels already in 

use in the region. For example, East St. Louis, Illinois, and St. Louis, 

Missouri (two cities in the same metropolitan area, which straddles two 

states and two EPA regions) separately applied to EPA and received 

approval for different gasoline blends. The use of special gasoline blends 

may continue to expand given that EPA recently finalized a more stringent 

federal standard for ozone and, as a result, another 138 counties across the 

United States are now out of compliance with the national air quality 

standard. To meet the new standard, it is likely that many more locations 

will apply to use special gasoline blends. To date, EPA has generally 

approved such applications and does not have authority to deny an 

application to use a specific special gasoline blend as long as that blend 

meets the environmental criteria established in the 1990 amendments to 

the Clean Air Act. EPA staff told us that there had been congressional 

debate regarding EPA’s authority during consideration of recent energy 

legislation, but that its authority had not changed as of May 2005.
Page 5 GAO-05-421 Special Gasoline Blends

Use of these special gasoline blends reduces vehicle emissions by varying 

degrees. California’s special gasoline blend—the fuel formulated to reduce 

emissions the most—offers the greatest reductions. Specifically, EPA 

models how different gasoline blends affect emissions and estimates that 

California’s blend reduces VOCs by 25-29 percent and NOx by about 6 

percent compared with conventional gasoline, while also reducing 

emissions of toxic chemicals and other substances. In contrast, the most 

commonly used special gasoline blend—one of the least stringent blends 

and used primarily in the Gulf Coast region—is estimated to reduce VOCs 

by about 12-16 percent and NOx by less than 1 percent compared with 

conventional gasoline. The extent of reductions remains unclear, however, 

because these estimates are based, in part, on data regarding how special 

gasoline blends affect emissions from older vehicles, and these data have 

not been comprehensively validated through testing on current vehicle 

types with newer emissions controls. In the case of oxygenates, there 

appears to be agreement that the addition of oxygenates reduces emissions 

from older vehicles. However, improvements in automobile technology in 

newer vehicles now automatically reduce emissions of carbon monoxide 

and other pollutants and, for these vehicles, may have negated many of the 

benefits of adding oxygenates to gasoline. Some studies have also found 

that use of ethanol can increase emissions of pollutants that can increase 

ozone levels. Regarding air quality, EPA and other experts have concluded 

that improvements in air quality seen in some parts of the country are at 

least partly attributable to the use of special gasoline blends. However, 

studies on the impact of individual emissions reduction efforts—such as 

special gasoline blends—are limited and incomplete, in part because of 

difficulty isolating the effect of gasoline blends from other factors that 

affect air quality such as weather and emissions from other sources. 

The proliferation of special gasoline blends has made it more complicated 

to supply gasoline and has raised costs, significantly affecting operations at 

refineries, pipelines, and storage terminals. At refineries, making these 

blends can require additional investment such as installing new processing 

equipment and the use of larger amounts of valuable components in the 

blending process—making it more costly to produce special gasoline 

blends. Once produced, different blends of gasoline must be kept separate 

throughout the shipping and delivery process, and the increased number of 

gasoline blends has reduced the capacity of pipelines and storage terminal 

facilities, which were originally designed to handle fewer products. For 

example, several pipeline companies reported that the capacity of their 

systems has been reduced because they have had to slow the speed of 

products through the pipelines in order to off-load special blends at 
Page 6 GAO-05-421 Special Gasoline Blends

specific locations, which raises the average cost of shipping gasoline. 

Similarly, storage terminals have not been able to fully utilize the volume of 

their storage tanks because the tanks were designed to handle fewer types 

of fuel and are often larger in size and fewer in number than necessary for 

handling smaller batches of special gasoline blends. Further, the 

proliferation of special blends has, according to several buyers from these 

wholesale markets, limited the number of suppliers of some of these fuels, 

posing challenges when traditional supplies are disrupted, such as during a 

refinery outage or pipeline delay. In the past, local supply disruptions could 

be addressed relatively quickly by bringing fuel from nearby locations; now, 

however, additional supplies of special gasoline blends may be hundreds of 

miles away. 

We evaluated pretax, wholesale gasoline price data for 100 cities and 

generally observed that the highest prices tended to be found in cities that 

use a special gasoline blend that is not widely available in the region or that 

costs significantly more to make than other blends. We also found high 

prices in cities that are far away from major refining areas or other sources 

of gasoline. For example, of the 100 cities we examined, most of the 20 

cities with the highest prices used special blends of gasoline. The other 

cities with the highest prices used conventional gasoline year-round, but 

these are long distances from major refining centers or are located on or 

near a single smaller pipeline. For the period, December 2000 through 

October 2004, average prices in the 20 highest-price cities were between 14 

and 41 cents per gallon higher than in the city with the lowest price. 

Further, 5 of the 10 cities with the highest average prices were in California, 

which uses a unique gasoline that only a few refiners outside of the state 

make and is expensive to refine. In contrast, the lowest prices were 

typically found in cities that are close to major refining centers or that used 

gasoline widely available in their region. For example, among the 20 cities 

with the lowest prices, 8 used conventional gasoline—the most widely 

available gasoline blend—and 9 used 7.8 reid vapor pressure (RVP) 

gasoline—the most widely used special blend, largely used in areas close to 

the Gulf Coast refining center. The other three cities with the lowest 

prices—Houston, Birmingham, and Atlanta—used less common special 

blends but are all close to the largest refining area, the Gulf Coast and, 

therefore, have many more potential supply options than more isolated 

cities do. In addition, we found that prices tended to be more volatile in 

cities that used special gasoline blends. Specifically, 18 of the 20 cities with 

the most volatile prices used special blends of gasoline, while 17 of 20 cities 

with the lowest volatility used either conventional or 7.8 RVP gasoline. 
Page 7 GAO-05-421 Special Gasoline Blends

While prices for special blends tend to be higher than for conventional 

gasoline, available data did not allow us to attempt to isolate the effects of 

specific special gasoline blends on gasoline prices or to definitively 

establish a causal link between specific special blends and price volatility. 

Specifically, we did not have sufficient data to control for all other potential 

contributing factors—such as the distance from cities to the sources of 

gasoline supply, or specific features of these cities that might influence 

prices regardless of the blend of gasoline used. However, there is a general 

consensus among the studies we reviewed and the experts we spoke with 

that the increased complexity, and higher refining, transportation, and 

storage costs associated with supplying special gasoline blends, have 

contributed to higher gasoline prices overall and for specific special blends 

either because of more frequent or severe supply disruptions or because 

higher costs are likely passed on at least in part to consumers. Moreover, 

our findings are generally consistent with results of government, academic, 

and private studies, which found that the gasoline supply system is 

increasingly stressed and also found isolated pockets of higher and/or more 

volatile prices in cities that use special gasoline blends that are not widely 

used. 

To provide better information about the emissions and air quality impacts 

of using special gasoline blends, we recommend that the EPA 

Administrator direct the agency to comprehensively study how special 

gasoline blends affect the emissions from the vehicles that comprise 

today’s fleet and use the results of this work to make appropriate 

modifications to the models that states use to estimate the emissions and 

air quality benefits of using them. In order to identify how to balance the 

environmental benefits of using special gasoline blends with the impacts 

that the use of these fuels have on the supply infrastructure and prices, we 

are recommending that EPA work with the states, the Department of 

Energy, and other stakeholders to develop a plan to balance these factors. 

If warranted by the results of this study, we are further recommending that 

EPA work with the Department of Energy and others to identify what 

statutory and other changes are required to achieve this balance and report 

these to Congress and to request that Congress provide the needed 

authority to the appropriate federal agency or agencies. 

We provided a copy of our draft report to EPA for comment. The agency did 

not comment on our findings or recommendations but did provide 

technical comments that we have adopted, as appropriate. 
Page 8 GAO-05-421 Special Gasoline Blends

Background The Clean Air Act, as amended, provides the basic statutory framework for 

the role of the federal government and the states in managing air quality in 

the United States. Among other things, the Act authorizes EPA to set and 

enforce standards, referred to as National Ambient Air Quality Standards 

(NAAQS), for pollutants. EPA has subsequently set standards for six 

pollutants—ozone, particulate matter, carbon monoxide, nitrogen dioxide, 

sulfur dioxide, and lead. While carbon monoxide is directly emitted when 

various fuels are burned, ground-level ozone is formed when VOCs and 

NOx mix in the presence of heat and sunlight. As a result, emissions of 

VOCs and NOx are considered by EPA and the states in their efforts to 

reduce concentrations of ground-level ozone. Because heat and sunlight 

act as catalysts in the formation of ground-level ozone, high ozone levels 

are most prevalent in spring and summer. 

EPA sets and enforces the NAAQS to, among other things, reduce the 

negative health effects of air pollution. Each of the six pollutants covered 

by the NAAQS is known to cause a variety of adverse health and other 

consequences. For example, at certain concentrations ground-level ozone 

and carbon monoxide can, among other things, cause lung damage, eye 

irritation, asthma attacks, chest pain, nausea, headaches, and premature 

death. To enforce the standards, EPA evaluates monitoring data on air 

quality to determine whether local air quality meets federal 

standards—designating areas as in either attainment (if they meet the 

federal standards) or nonattainment (if they do not meet the federal 

standards) with each of the NAAQS.3

Under the Act, states that contain areas in nonattainment with the NAAQS 

are required to identify how they will reduce emissions and improve air 

quality to meet them. For each pollutant, states are required to prepare a 

state implementation plan (SIP) and have the plan approved by EPA.4

States have choices in determining how to reduce emissions and meet air 

quality standards, determining, among other things, how much to reduce 

emissions from mobile sources such as automobiles compared with other 

sources of similar emissions such as power plants. Because use of gasoline 

3

In some cases, such as when air quality data are insufficient, EPA may not be able to 

designate an area as being in attainment or nonattainment. In these cases, EPA designates 

the area as “unclassifiable.”

4

In the event that a state does not develop an EPA-approved SIP, EPA may develop a federal 

implementation plan (FIP).
Page 9 GAO-05-421 Special Gasoline Blends

in automobiles emits several chemicals, including carbon monoxide, 

nitrogen oxides, and VOCs, and because emissions from automobiles are 

often an important contributor to local air quality problems, the federal 

government and the states often focus on reducing automobile emissions. 

Whatever the planned reductions, states must identify an inventory of air 

emissions and demonstrate in their SIPs how they will achieve attainment 

in a specific time frame. States typically demonstrate this through modeling 

analysis that estimates how the various efforts in their SIPs will reduce 

emissions and improve air quality. 

The Act also provides authority to set standards and establish requirements 

for some programs specifically designed to reduce vehicle emissions. For 

example, using authority provided under the Act, EPA has required newer 

cars to meet more stringent emissions standards, and vehicle 

manufacturers have incorporated emissions-control devices such as 

catalytic converters and oxygen sensors to meet them. Further, the Act 

requires cars to have under-the-hood systems and dashboard warning lights 

that check whether emissions control devices are working properly. In 

addition, the Act requires that some areas—generally highly populated 

metropolitan areas—have programs for periodic inspection and 

maintenance of vehicles. These programs identify high-emitting vehicles, 

which sometimes have malfunctioning emissions control devices, and 

require vehicle owners to make repairs before the vehicles can be 

registered. 

Federal and State Actions 

Regulate Gasoline 

The Act gives the federal government, through the EPA, primary authority 

for regulating the environmental impacts of gasoline use.5

 For example, the 

Act sets minimum national standards for conventional gasoline, as well as 

requiring that certain gasoline blends formulated to reduce emissions be 

used in some areas with especially poor air quality. Specifically, for certain 

areas with long-standing and especially poor air quality, the federal 

government requires the use of special reformulated gasoline, commonly 

referred to as RFG. The amendments also require other areas to use special 

5

Before 1990, fuel requirements were much simpler, with only limits on volatility in the 

summer months to control ozone formation. The state of California chose to more 

stringently regulate gasoline formulations before the federal government. Because 

California regulated gasoline formulations prior to the specific authority provided to the 

EPA, California may continue to require more stringent fuel formulation requirements 

without EPA approval, but must at least meet (or exceed) the other federal requirements.
Page 10 GAO-05-421 Special Gasoline Blends

gasoline blends designed to reduce summertime ozone pollution and 

wintertime carbon monoxide pollution. 

The Act allows states or regions not required to use RFG to seek EPA 

approval to require use of other special gasoline blends to aid in improving 

air quality, provided that they do not violate minimum federal standards. In 

2001, EPA studied the proliferation of gasoline blends and reported that 

several states had chosen special blends other than RFG for one or more of 

three reasons: (1) the states were not eligible to require RFG because their 

air quality was not bad enough, (2) the states wanted to avoid the RFG 

requirement to use an oxygenate and its added cost, (3) fuel suppliers and 

states believed that the other special blend would be less costly than RFG 

while meeting their need to reduce emissions. States seeking to use a 

special gasoline blend must obtain formal approval from EPA, generally the 

regional office with authority to review their SIPs. Specifically, under the 

Clean Air Act, section 211(c)(4)(C), EPA may approve applications by 

states to use special gasoline blends if the states demonstrate that the fuel 

is needed to reach attainment with federal air quality standards. 

In guidance issued in August 1997—after several of the special gasoline 

blends were approved—EPA clarified that they can approve a state 

gasoline requirement only if “no other measures that would bring about 

timely attainment exist,” or if other measures are “unreasonable or 

impracticable.” The guidance requires that states do four things in their 

application for approval of a new or revised SIP: (1) quantify the estimated 

emissions reductions required to reach attainment with the federal NAAQS 

for ozone; (2) identify possible control measures that could be used in 

place of special gasoline blends and provide emissions reduction estimates 

for those measures; (3) explain why those measures are “unreasonable or 

impracticable”; and (4) show that, even with use of all “reasonable and 

practicable” measures, additional emissions reductions are needed. As is 

the case with other new or revised SIPs, these applications are open for 

public comment, and EPA must consider those comments before making a 

decision. Once approved, states’ special gasoline blends become federally 

enforceable requirements. 

Under some circumstances, EPA may temporarily waive special gasoline 

blend requirements, referred to as granting enforcement discretion, if, for 

example, the required special gasoline blend is not available due to a 

supply disruption. Over the past several years, EPA has waived the 

requirement to use these special gasoline blends on several occasions 

when it determined that overall supplies might become tight. We found that 
Page 11 GAO-05-421 Special Gasoline Blends

EPA has granted enforcement discretion on at least 23 occasions, allowing 

gasoline that did not comply with local requirements to be sold there. The 

causes of these supply disruptions included the 2003 blackout in the 

Northeast, the series of hurricanes in Florida and the Gulf Coast in 2004, as 

well as refinery fires, pipeline breaks, and other infrastructure problems. 

Although there was one short waiver that applied nationwide following the 

terrorist attacks of September 11, 2001, several of the other waivers were 

provided to local areas with particularly stringent gasoline formulations 

including St. Louis, Chicago/Milwaukee, Atlanta, Las Vegas, and Phoenix 

when there were supply shortages in these areas.

All Gasoline Is a Blended 

Mix of Components Derived 

Primarily from Crude Oil

All gasoline is a blend of different components that are predominantly 

produced in refineries. The simplest refineries primarily separate the 

components already present in crude oil. More complex refineries also 

have the ability to chemically change less valuable components of crude oil 

into more valuable ones. Because of their ability to chemically alter 

components, complex refineries can increase the amount of gasoline 

yielded from a given amount of crude oil and reduce the amount of less 

valuable products. Although most refineries can process many types of 

crude oil, refineries are generally configured to run most efficiently when 

refining a specific type of crude oil into a specific group of products.

Absent specific regulatory requirements, refiners blend several 

components derived from crude oil to produce a gasoline that achieves 

acceptable engine performance at the lowest cost. Two key aspects of 

gasoline affect engine performance: 

• Reid vapor pressure is a measure of gasoline’s tendency to evaporate 

and also reflects the ease with which it ignites when the spark plug fires 

in a cold engine. To maintain engine performance, RVP must vary by 

season and region. Higher RVP is required in colder climates and 

seasons to allow an engine to start. 

• Octane number is a measurement of gasoline’s tendency to ignite 

without a spark, commonly known as “knocking” in a running engine. 

Some high-performance and other vehicles require gasoline with a 

higher octane number. To satisfy these requirements and consumer 

demand, retailers in the United States typically sell three different 

octane grades of gasoline.
Page 12 GAO-05-421 Special Gasoline Blends

Special gasoline blends developed to reduce pollution are generally 

adjusted in at least one of the following ways: 

• RVP is reduced during the summertime to reduce VOC emissions. 

Reducing the RVP of gasoline requires reducing the amount of very light 

compounds, such as butanes and pentanes, blended into the gasoline.

• Toxics, their precursors, or other chemicals are limited so they are not 

released into the air when the gasoline is burned. Some of these, such as 

sulfur, naturally occur in crude oil while others, such as benzene, result 

from gasoline refining. 

• Oxygenates, chemical compounds containing oxygen to aide in 

combustion, are added to gasoline to improve environmental 

performance when the gasoline is burned, including reducing carbon 

monoxide (CO) emissions. The most commonly used oxygenates are 

MTBE and ethanol. Several states have banned MTBE as a result of 

concerns about groundwater pollution and have switched to using 

ethanol as an oxygenate where required. 

Gasoline Is Moved from 

Refineries to Consumers 

through a Complex, Shared 

Distribution System

Gasoline is shipped from U.S. refineries to consumers by some 

combination of pipelines, water barges, rail, and trucks to retail gasoline 

stations. Most of the country’s refining capacity is located in the Gulf Coast, 

West Coast, East Coast, or Midwest with only a small amount in the Rocky 

Mountain states. As shown in figure 1, the Gulf Coast region supplies 

gasoline to all the other regions—of these, the Midwest and the East Coast 

are the most dependent on gasoline from the Gulf Coast. The East and West 

Coast markets have also imported gasoline from other parts of the world 

such as Canada, Europe, and the Caribbean. 
Page 13 GAO-05-421 Special Gasoline Blends

Figure 1: Gasoline Supply and Demand, September 2004

Several large pipelines travel inland from refineries in the Gulf Coast, East 

Coast, and West Coast, connecting these key supply centers to areas where 

gasoline is used. In general, these large pipelines provide the cheapest 

method for transporting large volumes of gasoline, and pipelines account 

for more than half of the gasoline shipments in the United States. Several of 

the major U.S. pipeline systems, such as the ones serving the Midwest and 

the East Coast, deliver gasoline and other fuels used in multiple states. 

Figure 2 shows the pipeline system and the major refineries in the 

continental United States. The largest concentration of pipeline capacity 

links the Gulf Coast refining region to the large consumer markets in the 

Midwest and East Coast, while fewer and smaller pipelines connect 

refining regions to the more sparsely populated states in the Rockies and 

parts of the West Coast region.

Production

Consumption

Barrels per day in thousands

East Coast

1,306

2,817

1,944

2,588

3,487

1,780

282 303

1,523 1,514

West Coast

Rockies

Gulf Coast

Midwest

Source: GAO analysis of EIA data.
Page 14 GAO-05-421 Special Gasoline Blends

Figure 2: Map of Key Pipelines and Refineries, 2004

At various points between refining and final retail consumption, gasoline is 

stored in large tanks, some holding hundreds of millions of gallons of fuel. 

In many cases, gasoline is stored in tanks at the refinery itself while 

awaiting shipping. In other cases, fuel is stored at terminal stations located 

along the pipeline that generally include multiple large tanks. A terminal 

station serves as a storage facility for gasoline and other petroleum 

products at places throughout the petroleum refining and transportation 

process. Some terminals are affiliated with pipelines and used as part of 

pipeline operations, such as for withdrawals or when pipelines converge. 

Other terminals are used to allow gasoline and other products to be loaded 

or off-loaded from barges or tankers. Still other terminals are used to hold 

Refinery

24 or more inches

12 to less than 24 inches

Less than 12 inches

Legend

Gasoline pipeline diameters

Sources: GAO analysis of Department of Transportation and the Energy Information Administration data. 
Page 15 GAO-05-421 Special Gasoline Blends

gasoline before it is distributed, generally by trucks, to retail gasoline 

stations. In all of these locations, different gasoline blends must be stored 

separately, with only one fuel per tank at any given time. 

Ethanol that is added to gasoline cannot be shipped in pipelines with other 

petroleum products because of ethanol’s tendency to absorb water. 

Instead, ethanol is shipped primarily by rail or trucks to terminal stations 

where it is “splash” blended—mixed in specific proportions as the fuel is 

added to the storage tank or tanker truck. The federal government and 

some states have considered requiring or expanding the use of ethanol to 

reduce consumption of oil and increase demand for agricultural products 

used to produce it, such as corn. 

Special Gasoline 

Blends Are Widely 

Used and Use May 

Increase in the Future

There were 12 distinct gasoline blends in use in the United States during 

the summer of 2004: 11 special gasoline blends and the conventional 

gasoline used everywhere a special blend is not used. When different 

grades of gasoline, special blends used in winter, and other factors are 

considered, the number of gasoline blends rises to at least 45. New ozone 

standards and other factors may further increase the number or the use of 

special gasoline blends in the future, in part because EPA must approve any 

state’s application to require use of a special gasoline blend as long as the 

proposed fuel meets EPA’s environmental standards.

Eleven Special Summer 

Gasoline Blends Were Used 

Mostly in Large Cities 

Creating Isolated Markets

Eleven special gasoline blends were used in the United States during the 

summer of 2004 in addition to conventional gasoline. The use of special 

gasoline blends is most prominent during the summer because special fuels 

are used predominantly to reduce summer ozone levels, and gasoline use is 

generally the highest during the summer. The requirement to use these 

fuels requires that all the fuel sold at terminals meet certain specifications 

at a certain date, which generally requires terminal operators to draw down 

their inventory of non-summer fuels in advance of filling their tanks with 

summer fuels. Special gasoline blends are primarily used in highly 

populated urban areas, and 34 states use a special gasoline blend in one or 

more areas. The 11 special gasoline blends in use during the summer of 

2004 fell into the following categories:

• Three different types of RFG used year-round, the federally required fuel 

used in areas with the worst air quality. RFG has very low RVP; reduced 

levels of benzene and other toxics; and contains an oxygenate. The type 
Page 16 GAO-05-421 Special Gasoline Blends

of RFG blend depends on the area of the country where the gasoline is 

used and the oxygenate selected. These blends are identified in figure 3 

as “RFG North,” “RFG North with ethanol,” and “RFG South.”

• Two types of California Cleaner Burning Gasoline (CBG) used 

year-round, also referred to as CARB. California CBG is formulated to 

meet the most stringent gasoline standard in the United States, including 

very low RVP and reduced levels of sulfur, benzene, and other 

chemicals. In general, the state of California does not require the 

addition of an oxygenate in areas not subject to federal RFG 

standards—identified in figure 3 as “CA CBG.” Gasoline sold in areas 

also subject to the federal RFG standard must contain an oxygenate, 

identified as “RFG/CA CBG.” 

• In the summer, Arizona allows the use of either a gasoline blend very 

similar to RFG or a blend similar to CBG. The blend required in Arizona 

is identified as “AZ CBG.”

• Three summer blends with various reductions in RVP. The federal 

government requires some areas to use 7.8 RVP gasoline6

 and, in other 

areas, states have mandated the use of this blend. The other two 

low-RVP blends are state requirements. These blends are identified in 

figure 3 as “7.8 RVP,” “7.2 RVP,” and “7.0 RVP.” 

• One blend with reduced RVP and reduced sulfur content. The state of 

Georgia requires this blend for use in the Atlanta area, and it is identified 

in figure 3 as “7.0 RVP, 30 ppm sulfur.”

• One blend of conventional gasoline with a minimum of 10 percent 

ethanol by volume, used year-round. The state of Minnesota requires 

this blend, which is identified in figure 3 as “Ethanol Mandate.”

As figure 3 shows, many areas using special gasoline blends are surrounded 

by regions that use conventional gasoline. In some cases, these areas are 

relatively large, as is the case for the state of California, where nearly all of 

the state uses the same fuel—RFG/CA CBG. In other cases, “islands” of 

special gasoline use can divide otherwise regional gasoline markets. For 

example, the St. Louis metropolitan area, which includes parts of two 

6

RVP values throughout this report are measured in pounds per square inch at 100oF, the 

standard industry measure.
Page 17 GAO-05-421 Special Gasoline Blends

states7—Missouri and Illinois—uses three different fuels: one special 

gasoline blend required on the Missouri side, a different special gasoline 

blend required on the Illinois side, and conventional gasoline is allowed in 

the surrounding area. In some cases, special gasoline blends are used in 

only one area of the country. For example, California CBG, Arizona CBG, 

and the special blend used in Atlanta, Georgia, are not used anywhere else 

in the United States. Even relatively common special gasoline blends can 

create isolated markets if they are not used in nearby areas. For example, 

although 7.8 RVP is a relatively widely used blend, Pittsburgh, 

Pennsylvania, is the only city in its region that uses it. Similarly, the 

Chicago/Milwaukee area uses RFG North with ethanol, a gasoline blend 

used in the Northeast but not used elsewhere in the Midwest. 

7

Each state is overseen by a separate EPA regional office; Missouri is overseen by EPA 

region 7 and Illinois is overseen by EPA region 5.
Page 18 GAO-05-421 Special Gasoline Blends

Figure 3: Special Gasoline Blends—Summer 2004

Note: Unshaded areas (shown in white) are areas where conventional gasoline is used.

Special gasoline blends accounted for more than half the gasoline 

consumed in the United States during the summer of 2001—the last year 

for which we had complete data. Figure 4 shows the relative consumption 

of the different gasoline blends then in use. Of the special fuel blends, RFG 

and 7.8 RVP blends together accounted for about 33 percent of the national 

gasoline market. California CBG and Arizona gasoline blends accounted for 

roughly 13 percent of total U.S. gasoline consumption. The remaining 6 

percent of gasoline use was divided among four separate blends. 

Legend

Numbers in parentheses indicate the number of counties

7.0 RVP (8)

7.0 RVP, 30 ppm sulfur (44)

7.2 RVP (3)

7.8 RVP (184)

AZ CBG (3)

CA CBG (38)

Oyxgenated fuel (87)

RFG North (59)

RFG North w/ethanol (37)

RFG South (60)

RFG/CA CBG (20)

Sources: GAO analysis of EPA, ExxonMobil, the Oil Price information Service, and state environmental agencies’ data.
Page 19 GAO-05-421 Special Gasoline Blends

Figure 4: Market Shares for the Various Gasoline Blends Used in 2001

Other Factors Raise the 

Number of Gasoline Blends 

Carried by Pipelines and 

Other Means to at Least 45

While we have reported that there are 11 special blends used or handled 

during the summer of 2004, additional factors increase the total number of 

gasoline blends sold in the United States throughout the year to at least 45. 

First, although this report focuses on summer gasoline blends, at least 3 

special winter-only gasoline blends are required to be used in areas of eight 

states. Use of these fuels requires that fuel terminals in these areas 

transition from the fuel that they use in the non-winter season to the 

required winter fuel. These blends contain an oxygenate to address winter 

carbon monoxide pollution. Second, because of consumer demand, many 

gasoline stations sell gasoline in three octane grades—both premium and 

regular grades are refined and shipped to terminals, where they are 

blended together to make a midgrade gasoline. Therefore, each gasoline 

blend is effectively two fuels from the perspective of pipelines and 

terminals. As a result, pipelines, fuel terminals, and retail gasoline stations 

Source: GAO analysis of EPA data.

1%

7.0 RVP

1%

7.2 RVP

2%

Ethanol mandate

2%

7.0 RVP, 30 ppm sulfur

49%

13%

21%

13% California gasoline

 AZ CBG (3%)

 CA CBG (3%)

 RFG/CA CBG (7%)

RFG blends

 RFG North w/ethanol (3%)

 RFG North (8%)

 RFG South (10%)

7.8 RVP

Conventional
Page 20 GAO-05-421 Special Gasoline Blends

carry multiple variations of the gasoline blends previously discussed. Third, 

gasoline blends differ regionally and seasonally because differences in 

outside temperatures require different blends to maintain vehicle 

performance. The primary difference among these blends is RVP. Refiners 

produce gasoline with higher RVP in cold conditions to allow cars to start 

and gasoline with lower RVP during warm conditions to improve vehicle 

operation, even in areas that use conventional gasoline. As a result of these 

differences, refiners routinely ship different fuels to different regions and 

also ship different gasoline blends seasonally, but special blends tend to 

compound these variations. One official with a major petroleum company 

reported that there were at least 45 different grades of gasoline used in the 

United States. 

New Ozone Standard and 

Other Factors May Further 

Increase the Number and/or 

Use of Special Gasoline 

Blends 

A new ozone standard and deteriorating air quality may lead to an 

increased number of special gasoline blends and/or more use of these 

blends in the future. In 2004, EPA issued a final rule implementing a new, 

more stringent federal air quality standard for ozone that led to the 

identification of 138 additional counties in nonattainment or maintenance 

as seen in figure 5.8

 EPA officials that we spoke with did not have any 

indications that states were planning to submit applications to use special 

blends in these areas but acknowledged that gasoline is viewed as an 

effective emissions control strategy and said that they expect some states 

to consider doing so. Oil company officials told us that officials from some 

states had approached them to discuss using special gasoline blends. 

Because states must begin preparing SIPs for the recently designated 

nonattainment areas, and because several of those states already have 

chosen to use special gasoline blends, it appears likely that states may seek 

approval to use such blends in more areas. 

8

The new standard measures ozone levels averaged over 8 hours, while the prior standard 

measures these levels over 1 hour. 
Page 21 GAO-05-421 Special Gasoline Blends

Figure 5: Map of Areas Not Meeting New 8-Hour and Former 1-Hour Ozone Standard, 2004

Several other factors could also affect the number or use of special 

gasoline blends. State MTBE bans could force more areas of the country to 

shift from their current blend to an ethanol blend. In June 2004, EPA 

identified 19 states that had bans on the use of MTBE either in place or

Source: GAO analysis of EPA data. 

1 hour

8 hours

Both
Page 22 GAO-05-421 Special Gasoline Blends

scheduled to phase in, though some of these states did not use MTBE.9

Worsening air quality in areas such as Atlanta and Baton Rouge may require 

the gasoline used in these cities to shift from a special blend to RFG, 

reducing the number of fuels.10 In addition, a new federal standard for all 

gasoline—including special blends—that mandates reduced sulfur, 

promises to improve the effectiveness of catalytic converters already 

present in most vehicles and could aid some areas in meeting federal air 

quality standards, potentially reducing the need for these fuels in some 

areas.

EPA Lacks Authority to 

Deny Requests to Use 

Special Gasoline Blends 

Due to Effects on Supply

During the course of our work, staff from EPA’s Office of the General 

Counsel stated that EPA could not deny an application to require the use of 

a special gasoline blend that addressed the four elements outlined in EPA’s 

1997 guidance. They explained that EPA’s determinations often deferred to 

states’ evaluations in their applications that, under the Clean Air Act, 

section 211 (c)(4)(C), no other measures that would bring about timely 

attainment exist, or that existing measures, such as vehicle inspection and 

maintenance programs, are unreasonable or impracticable. Further, staff 

with EPA’s Office of the General Counsel staff told us EPA could not reject 

an application on the basis of the potential impacts on gasoline supply or 

other regional effects on the gasoline market because such a rejection 

would be outside of EPA’s current authority. Several of the special fuels in 

use during 2004 were approved prior to the issuance of the 1997 guidance, 

and EPA officials reported that a variety of standards were used to evaluate 

applications. 

EPA’s most recent effort to examine special gasoline blends is consistent 

with EPA’s view that the agency does not have authority to reject a state’s 

application based on regional supply impacts or costs. In 2001, EPA 

released a staff white paper, in response to a presidential directive, 

examining whether there were options to maintain or improve 

environmental benefits while also improving the supply of fuels, such as 

9

These states are, with phase-in year in parentheses, California (2003), Colorado (2002), 

Connecticut (2000), Illinois (2004), Indiana (2004), Iowa (2000), Kansas (2004), Kentucky 

(2006), Maine (2007), Michigan (2003), Minnesota (2000), Missouri (2005), Nebraska (2000), 

New Hampshire (2007), New York (2004), Ohio (2005), South Dakota (2001), Washington 

(2004), and Wisconsin (2004).

10EPA determined that these cities are required to use RFG; however, the states sued, and 

the lawsuit was in the courts as of April 2005.
Page 23 GAO-05-421 Special Gasoline Blends

gasoline.11 In that report, EPA examined a number of options to reduce the 

number of fuels available for states to choose from—similar to a gasoline 

menu. That report concluded that these options were beyond EPA’s 

statutory authority and would require legislative action to implement.12 The 

white paper also noted that it represented a first step in EPA’s response to 

the directive, but that significant additional analysis and study were 

required. EPA staff told us that there had been congressional debate 

regarding EPA’s authority during consideration of recent energy legislation, 

but that its authority had not changed as of May 2005.13 In the study, EPA

identified a number of changes that it would make to ease the seasonal 

transition between gasoline blends used during different parts of the year. 

Staff also said that little, if any, additional work had been done since the 

2001 study, in part because of EPA’s lack of authority to implement some of 

the actions outlined in the study. 

Special Gasoline 

Blends Reduce 

Emissions and 

Contribute to 

Improved Air Quality

Special gasoline blends reduce emissions—particularly those involved in 

the formation of harmful ground-level ozone—by varying degrees, 

depending on the blend. The extent of reductions remains unclear, 

however, because the estimates have not been comprehensively validated 

through testing on current vehicles and emissions controls. According to 

EPA and others, these special gasoline blends have contributed to 

improvements in air quality seen in some parts of the country. The extent of 

their contribution to improvements relative to that of other contributing 

factors, such as reductions in power plant emissions, is somewhat 

uncertain because of the difficulties in isolating the effects of individual 

emissions reduction efforts, such as special gasoline blends, from other 

factors that may affect air quality. 

11The directive was issued as part of the President’s National Energy Policy Report issued on 

May 17, 2001.

12According to EPA staff, Congress considered providing additional authority in legislation 

after the release of this report; however, those bills did not pass. As of April 2005, new 

legislation passed by the House of Representatives, but not yet passed by the Senate, would 

limit the number of gasoline blends, but this bill has not yet become law. 

13In April 2005, the U.S. House of Representatives passed a bill, H.R. 6, which, among other 

things, limited the expansion of special gasoline blends and requires EPA and DOE to 

examine the issue and present options to Congress. As of May 2005, no comparable bill had 

passed the Senate. 
Page 24 GAO-05-421 Special Gasoline Blends

Special Gasoline Blends 

Reduce Emissions, but the 

Extent of Reduction 

Remains Uncertain 

Over the past 15 years, a wide range of studies by EPA and others have 

concluded that changes to the properties of gasoline can substantially 

reduce emissions from automobiles. For example, in 1996, EPA concluded 

that RFG and low-RVP blends can both significantly reduce VOCs but that 

RFG offers greater promise in reducing NOx, CO, and toxics. The Air 

Quality Improvement Research Program (AQIRP), funded by the auto and 

oil industries, analyzed gasoline properties in detail and comprehensively 

tested a variety of gasoline blends in a range of vehicles between 1989 and 

1992. This effort produced data regarding how the use of various gasoline 

blends affect emissions from then-current vehicles and concluded that 

changing certain properties of gasoline, in particular reducing RVP and 

sulfur, was effective in reducing emissions of pollutants such as NOx, CO, 

and also hydrocarbons such as unburned fuel. According to EPA officials, 

using special gasoline blends is attractive to states because the blends can 

offer immediate emissions reductions from vehicles already on the road.

EPA and others have used the results of these studies to develop models 

that provide detailed emissions estimates for several of the special gasoline 

blends currently in use. These models have been used by states in their 

SIPs to estimate the expected emissions from requiring the use of special 

gasoline blends instead of conventional gasoline.14 As shown in table 1, the 

models estimate that special gasoline blends reduce emissions by varying 

degrees. California’s gasoline—the blend formulated to reduce emissions 

the most—is estimated to provide the greatest level of emissions 

reductions, about 25-29 percent for VOCs and about 5.7 percent for NOx. 

RFG is estimated to provide about the same level of VOC reduction, a lower 

NOx reduction of about 0.7 percent, but also a 10-20 percent reduction in 

CO. The special gasoline blend most commonly used in areas not using 

conventional gasoline—gasoline with an RVP of 7.8—is estimated to 

reduce VOC emissions by 12-16 percent and NOx by about 0.7 percent. In 

addition to the pollutants listed in table 1, RFG and California’s cleaner 

burning gasoline also reduces emissions of some toxics such as benzene. 

14Excluding California, which uses the Motor Vehicle Emissions Inventory. 
Page 25 GAO-05-421 Special Gasoline Blends

Table 1: Projected Emissions Reductions Resulting from Low-RVP, RFG, and CBG 

Gasoline Blends

Source: GAO analysis of EPA data. 

a

Emissions reductions are based on reductions from conventional 9.0 RVP gasoline projected to be in 

use in calendar year 2006.

b

EPA estimated VOC and NOx emissions reductions for California CBG and RFG CA/CBG (which 

includes an oxygenate) were the same for these pollutants; however, RFG CA/CBG would likely 

provide some reduction of CO, in addition.

However, the extent of emissions reductions associated with various 

gasoline blends remains somewhat uncertain. GAO,15 the National 

Research Council, and others have identified concerns about the overall 

accuracy of emissions estimates. EPA has addressed some of the concerns 

about emissions estimates. In one effort to address concerns about the 

validity of emissions estimates, EPA sponsored a study that compared 

emissions estimates to measured emission data obtained between 1992 and 

2001. The study looked at pollutant concentration data from tunnels and 

vehicle exhaust data collected from vehicles on roadways using special 

remote sensing devices at a limited number of sites using a limited range of 

gasoline blends. As a result, EPA found that the observed emissions data 

conflicted with emissions estimates; in some cases the testing data were 

higher than predicted, while in other cases it was lower. 

Despite this effort, EPA has not comprehensively studied how various 

gasoline blends affect vehicle emissions since the early 1990s—when the 

AQIRP comprehensively tested a variety of gasoline blends in a range of 

vehicles. Since then, there have been advances in emissions control 

Estimated emissions reductionsa

Gasoline blend VOC NOx CO

Low RVP

7.8 12 to 16% 0.7% No effect

7.2 19 to 23% 0.7% No effect

7.0 21 to 25% 0.7% No effect

RFG

Federal RFG 25 to 29% 0.7% 10 to 20%

California CBGb 25 to 29% 5.7% Not estimated

15GAO, Air Pollution: Limitations of EPA’s Motor Vehicle Emissions Model and Plans to 

Address Them, GAO/RCED-97-210 (Washington, D.C.: Sept. 15, 1997). 
Page 26 GAO-05-421 Special Gasoline Blends

technology. Consequently, to the extent that emissions from vehicles with 

newer emissions control technology differ from those of older vehicles, 

emission estimates may become less certain, especially as vehicles with the 

newer technology compose a growing portion of the U.S. fleet. EPA 

officials acknowledge that their efforts since the early 1990s to validate 

emissions estimates have not allowed them to fully validate how special 

fuel blends operate in a full range of vehicles of varying vintages and 

designs over their operating lifetimes. EPA officials told us that they 

believe such a detailed analysis would improve their understanding of how 

special gasoline blends affect emissions, but said that they have not had 

sufficient budgetary resources to collect the needed data to support such 

an analysis. 

In addition to these broad concerns, there is also controversy over the 

emissions benefits associated with special blends containing oxygenates, 

which were initially added to gasoline to reduce the emissions of carbon 

monoxide and other pollutants. However, although there appears to be 

agreement that oxygenated fuels help reduce emissions of CO from older 

vehicles, recent studies indicate that the emissions benefits for newer 

vehicles are questionable. For example, AQIRP, the National Science and 

Technology Council, and others have reported that improvements in 

emissions controls on newer vehicles, such as oxygen sensors and 

computer-controlled emissions systems, may now automatically reduce 

emissions of CO and other pollutants and may negate many benefits of 

adding oxygenates. Further, some experts have concluded that adding 

oxygenates to gasoline may increase emissions of NOx and VOCs and may 

contribute to increased levels of ozone. As a result, some states, including 

California, New York, and Georgia have requested waivers from EPA to 

allow them to use fuel that does not contain an oxygenate. The state of 

California stipulated in its waiver application that its fuel reduces 

emissions to a greater extent than federal RFG and that the oxygenate 

requirement has impeded its efforts to reduce ozone. To date, EPA has not 

granted any of these waivers. Recently, Congress and others have 

considered expanding the use of ethanol in gasoline for other reasons, 

including to benefit U.S. farmers and to reduce the country’s reliance on 

foreign oil. 
Page 27 GAO-05-421 Special Gasoline Blends

Reduced Vehicle Emissions 

Have Led to Air Quality 

Improvements, but the 

Extent of Benefits 

Attributable to Special 

Gasoline Blends Is 

Uncertain 

EPA and other experts have concluded that improvements in air quality in 

some parts of the country are at least partly attributable to the use of 

special gasoline blends. In 2004, EPA reported that ground-level ozone has 

decreased over the past 10 to 25 years and that these reductions resulted, at 

least in part, from emissions control programs that include requirements to 

use special gasoline blends. Further, EPA and other experts concluded that 

special gasoline blends, such as RFG and low-RVP blends, are effective 

strategies for states to use to reduce ozone pollution. In addition, a 

research effort funded by AQIRP found that reducing RVP decreased peak 

ozone in several cities and would continue to provide benefits for years to 

come. In addition, the National Research Council reviewed EPA data and 

found that average ozone levels dropped by about 1 percent coincident 

with reduced emissions of VOCs, NOx, and CO from on-road vehicles, 

which fell by 31 percent, 2 percent, and 20 percent, respectively. Based on 

these and other data, the National Research Council concluded that 

improvement in air quality is likely attributable, at least in part, to recent 

improvements in gasoline properties.16 

Despite the conclusions that special gasoline blends have contributed to 

improved air quality, findings specifically linking air quality improvement to 

the use of special gasoline blends are limited and incomplete because of 

the inherent difficulties in isolating the effects of special gasoline blends 

from other efforts to improve air quality. Studies examining the effect of 

special gasoline blends on air quality noted that attributing a change in 

ozone levels to the use of a special gasoline blend would be difficult.17 In 

particular, experts from EPA, the National Science and Technology 

Council,18 and the National Research Council have determined that relating 

trends in the levels of ground-level ozone to trends in emissions and to 

emissions-control policies can be challenging because of the confounding 

effects of other variables, including the effects of other control efforts and 

16Other possible reasons for the improvements include the advent of more stringent 

standards for vehicles that gradually replace old vehicles built to more lenient standards 

than current models; and maturation of new-vehicle emissions-control hardware and 

software as field experience accumulated. 

17David Stikkers, “A Retrospective Study of Reformulated Gasoline Use in Chicago,” 

Environmental Informatics Archives. 1 (2003): 282-294. 

18The National Science and Technology Council is composed of representatives from several 

federal agencies charged with coordinating science and technology policies across the 

federal government. 
Page 28 GAO-05-421 Special Gasoline Blends

meteorological fluctuations. For example, the National Research Council 

noted that since the 1990s—when special gasoline blends became widely 

used—several other efforts to reduce emissions from vehicles have been 

made that could also explain changes in air quality, such as the addition of 

enhanced emissions-control systems and improvements in inspection and 

maintenance programs in some areas. During this time, EPA and the states 

have also undertaken efforts to reduce emissions from electric utilities, 

chemical manufacturing, and other stationary sources that could have 

contributed to the improvements. Further, because ozone is more readily 

created when VOCs, NOx, and CO react in sunny and hot weather, 

meteorological fluctuations affect the relationship between emissions and 

ozone levels. For example, EPA has identified cases where air quality 

improved, but the improvement was largely due to better weather (more air 

circulation, lower amounts of heat and sunlight, and other factors). 

According to the National Research Council and others, determining how 

much air quality improvement is specifically attributable to any specific 

emissions control program, including special gasoline blends, would 

require the collection of high-quality, long-term data on air pollution, on 

other control measures, and on weather. 

Use of Special Gasoline 

Blends Has Made It 

More Complicated and 

Costly to Supply 

Gasoline

The increasing numbers of special gasoline blends have made it more 

complicated and costly to supply gasoline, elevating the risk of localized 

supply disruptions. Producing special gasoline blends can require changes 

at refineries, making it more complicated and costly to produce gasoline. 

Special blends also add to the number of fuels shipped through pipelines, 

reducing the efficiency of the pipelines and raising costs. In addition, 

because the tanks at the fuel terminals were often built before the 

proliferation of blends, they are often too large and too few to efficiently 

handle the increased number and smaller size batches of special gasoline 

blends and, as a result, total storage capacity has fallen. Further, in some 

cases, the proliferation of blends has reduced the supply options available 

to some retailers, making them more susceptible to supply disruptions. 

Making Special Gasoline 

Blends Has Added 

Complexity and Costs at 

Refineries

Producing some special gasoline blends sometimes requires refineries to 

invest in additional refinery units, making their refineries more complex, or 

reducing their capacity to make gasoline. For example, producing 

cleaner-burning fuel with lower levels of toxic and other emissions, such as 

RFG or CBG, has required some refiners to install specialized units that 

remove sulfur and benzene during the refining process. Similarly, 
Page 29 GAO-05-421 Special Gasoline Blends

production of low-RVP gasoline requires that refiners leave out the lightest 

components typically included in conventional gasoline. Separating these 

components or converting them to ones that can be used in these blends 

may require additional refinery units. If the components are not 

immediately used in gasoline at that refinery, they may be stored, may be 

used in less valuable fuels such as diesel or jet fuel, or shipped to other 

refineries that can use these components. The removal and additional 

processing of these components can decrease the amount of gasoline a 

refinery can produce. For example, officials from one California refinery 

told us that their refinery could produce 12 percent more volume if it 

produced conventional gasoline rather than California gasoline because 

conventional gasoline uses more of the components that are typically 

generated in the refining process.19

Adding refinery units and losing refinery capacity can increase the overall 

costs of refining gasoline. Manufacturing low-RVP fuel generally involved 

reducing the use of some components and, as a result, was less costly than 

the more significant changes needed to make the cleanest burning blends. 

Specifically, in 1996, EPA estimated that low-RVP blends cost 1-2 cents per 

gallon more to make than the conventional gasoline at the time. In contrast, 

in 2003, the Energy Information Administration (EIA), within the 

Department of Energy, estimated that blends formulated to meet the most 

stringent standards, such as oxygenated California gasoline, cost 5-15 cents 

more per gallon to make than the conventional gasoline required at the 

time and that RFG generally costs 2.5-4 cents more per gallon to make. 

In addition, the use of oxygenates in blends such as RFG further increases 

the complexity and cost of the refining process because refiners must 

either invest in equipment to produce oxygenates from crude oil (in the 

case of MTBE) or they must purchase these components from other 

sources. MTBE is generally less expensive than ethanol as an oxygenate 

but has raised water quality concerns. As described earlier, ethanol is 

generally shipped by truck or rail, stored separately from other gasoline 

components, and blended just before gasoline is sent to retail stations. The 

higher cost of purchasing ethanol during the period of our analysis, 

together with these separate handling procedures, adds to the total cost of 

19While the switch from conventional gasoline to a special gasoline blend has led to 

reductions in refining capacity, all other things equal, refiners, in investing in new processes 

to make the special blends, have also typically increased the capability of their refineries to 

convert less valuable components to more valuable ones, thereby increasing their capacity. 
Page 30 GAO-05-421 Special Gasoline Blends

making ethanol-blended gasoline. Additionally, because ethanol has a high 

RVP, more components must be removed from ethanol-blended gasoline 

than from MTBE-blended gasoline to meet specifications for RVP. 

Removing these components and reprocessing them or diverting them to 

other products increases the cost of making ethanol-blended gasoline.

Shipping More Special 

Gasoline Blends Reduces 

Pipeline Capacity and 

Raises Costs 

Shipping gasoline on a pipeline requires a great deal of coordination 

between refineries, pipelines, and terminal stations to maintain pipeline 

flows while fuels are being added and withdrawn. Pipeline operators told 

us that they develop schedules of when individual shipments (called 

batches) will occur at least 1 month in advance; however, some changes to 

this schedule may occur up to the date when a product is placed on the 

pipeline to adjust for, among other things, the need for more of a specific 

gasoline blend in some locations. On the day of shipment, pipeline 

operators precisely coordinate when refineries or other shippers add or 

“inject” fuel to the pipeline and when fuel is taken off of the pipeline along 

with other aspects of operating the system. Companies shipping fuel on the 

pipeline, may request to keep their products isolated from others (a 

segregated batch) or may choose to combine their product on the pipeline 

with other blends meeting similar or identical product specifications (a 

fungible batch). Because of the large number of gasoline blends and, 

because some shippers require segregated batches, the number of fuels 

shipped in pipelines has increased dramatically in recent years. For 

example, one pipeline company noted that in 1970 they shipped 10 different 

products on their system over the entire year, whereas in 2004 they shipped 

128 (including distinct blends and segregated products).20

The increased number of special gasoline blends has reduced the effective 

capacity of the nation’s petroleum products pipeline infrastructure because 

the pipelines are generally operated at slower speeds to accommodate 

more and smaller batches of gasoline while keeping the different blends 

separate. The speed at which centrally controlled pumps move product 

along pipelines—typically between 3 and 8 miles per hour—can be affected 

by a number of factors, including the volume of product relative to the 

20Many of the pipelines that transport gasoline also ship other petroleum products such as 

diesel fuel, jet fuel, and propane—some of which also require multiple, although fewer, 

formulations. Recent regulations that will require lower levels of sulfur in some diesel fuels 

will further increase the number of fuels moving through the pipeline infrastructure and 

may cause other complications in maintaining fuel quality and are expected to have similar 

effects as special gasoline blends. 
Page 31 GAO-05-421 Special Gasoline Blends

pipeline capacity being shipped, the size of batches, and the availability of 

terminal storage along the pipeline route. Several pipeline operators told us 

that, prior to the introduction of special gasoline blends, they shipped many 

fewer products and much larger batches than they do now. Further, they 

said that shipping smaller volumes can require them to slow or stop the 

pipeline to allow shippers to inject or withdraw individual fuels at fuel 

terminals or other locations. Lost opportunities associated with reductions 

in the amount of fuel that the pipeline can transport serve to raise the 

average cost of moving gasoline. 

The increased number of fuels and fuel types shipped on pipelines has also 

increased losses and costs associated with mixing of fuels. Two types of 

fuel mixtures occur at the interface between batches on pipelines: 

downgrading and transmix. Downgrading occurs when two similar fuels 

mix, but the resulting mix no longer meets the more valuable product 

specification. For example, if a high- and regular-octane gasoline are 

mixed, then the downgraded gasoline may be sold only as lower-priced, 

regular gasoline. Transmix results when two dissimilar fuels mix and the 

fuel cannot be used without reprocessing. For example, if diesel fuel and 

gasoline mix, the transmix must be processed to separate the fuels into 

usable products. Similarly, because MTBE is banned in some areas, if 

gasoline blends containing MTBE come in contact with other fuels, the 

mixed fuel is considered transmix and must be reprocessed to remove the 

MTBE before it can be used. To minimize losses associated with 

downgrades and transmix and still maintain efficiency, pipelines generally 

set a minimum batch size. Several pipeline operators reported that they 

have witnessed increased losses and costs due to downgrades and because 

more fuel requires reprocessing as the number of special gasoline blends 

has increased. 

In addition, according to some pipeline company officials, because some 

gasoline blends are only used in one city or only in some areas served by a 

pipeline, shippers incur additional costs if these gasoline blends are not 

taken off the pipeline at the right location. For example, one pipeline 

operator told us that RFG with MTBE shipped in Midwest pipelines cannot 

be used without costly reprocessing if it is shipped past certain points on 

these pipelines because no regions beyond these points allow the use of 

RFG with MTBE. In some instances, the pipeline may need to be slowed, or 

even stopped, to allow a special gasoline blend to be taken out of the 

pipeline. 
Page 32 GAO-05-421 Special Gasoline Blends

Increased Numbers of 

Gasoline Blends Reduce 

Terminal Storage 

The increased number of petroleum products generally, including special 

gasoline blends, and the need to keep them separated, has reduced the 

storage capacity of some gasoline terminals which can create difficulties 

during periods when gasoline supplies are disrupted. To ensure product 

quality, special gasoline blends must be stored in separate tanks. Several 

terminal operators told us that their terminals were built before the 

proliferation of special gasoline blends and were designed to handle fewer, 

but larger, batches of gasoline. Terminal operators told us that, because 

many of the special gasoline blends are shipped in smaller batches, the 

tanks used for these blends are often not filled to capacity. One terminal 

operator told us that some new storage tanks had been built in recent 

years. This operator went on to say that adding new storage capacity at 

existing terminals is often either prohibitively expensive or extremely 

difficult because of space limitations and the need to obtain federal, state, 

and local regulatory approvals. One terminal operator told us that the 

company has chosen not to carry one or more gasoline blends used in its 

area because the company’s existing tanks were insufficient and building 

additional tank capacity was too costly. For these same reasons, it is often 

difficult to build new terminals. In addition to the complexity of these 

factors, terminal operators told us that the proliferation of special gasoline 

blends also raised their costs by reducing their ability to fully utilize their 

existing tanks, which cost them the opportunity to store additional fuels, or 

by forcing them to make additional investment to build more tanks, or 

both. 

In addition, terminal operators told us that reduced storage capacity at 

their facilities, combined with the increased number of fuels in the pipeline 

system, has made it more difficult to maintain adequate stockpiles of some 

gasoline blends. Several pipeline operators said that the interval between 

when a fuel is available from the pipeline may be 10 days or longer if 

capacity is not available on the pipeline—requiring that many days’ worth 

of fuel to be stored at the terminal. Increasing demand for gasoline 

combined with this longer period between shipments, and limited terminal 

storage, increases the likelihood that some areas will run out of gasoline 

while waiting for a shipment. One pipeline operator said that the terminals 

that they served did not run out of gasoline from 1995-1996, but that now 

one terminal per month runs out of fuel. One terminal operator explained 

that running out of gasoline can be very harmful to their business because 

terminal operators rely on retailers and independent gasoline tanker trucks 

to regularly visit their stations—visits that may not occur if their supplies 

are inconsistent. In addition, the operator told us that, when tanks are 

pumped dry and later refilled, they can release up to 1 ton of VOCs, which 
Page 33 GAO-05-421 Special Gasoline Blends

contributes to pollution. While the terminal operators we spoke with said 

they are generally able to maintain sufficient gasoline storage, they can run 

short of some fuels when demand is high or pipeline deliveries are delayed 

or interrupted. One operator noted that they increase their wholesale 

gasoline prices as their available supplies fall in an effort to reduce their 

sales and retain some gasoline for sale and avoid running out. The terminal 

operators we interviewed did not provide us data on the number of 

instances when they ran out of gasoline, but they said that the number has 

significantly increased in recent years. 

Special Blends Limit Supply 

Options in Wholesale 

Markets When Local Supply 

Disruptions Occur 

According to operators of independent retail gasoline stations that buy 

from the wholesale markets, they have more limited supply options as a 

result of the presence of special gasoline blends. According to an industry 

representative, some gasoline retailers affiliated with, or owned by, large 

oil companies (so-called “integrated” oil companies, such as ExxonMobil 

and ChevronTexaco) receive their gasoline—referred to as branded 

gasoline—only from these companies, generally paying slightly more for it. 

However, other companies that are not affiliated with these integrated oil 

companies, referred to as independent retailers, typically purchase 

gasoline from a variety of suppliers including, but not limited to, integrated 

oil companies and typically purchase gasoline at the lowest price available 

from nearby fuel terminals. As a result of this and other factors, 

independent retailers said that they generally sell gasoline at a lower price 

than branded gasoline stations. According to some, the introduction of 

special gasoline blends may increase the market power of some refiners. In 

its 2001 white paper, EPA noted that the development of special blends 

limits competition in the refining sector because some blends are small, 

and only a few refiners may choose to make some blends. Consistent with 

this view, independent retailers told us that they have had fewer choices in 

some markets near where special gasoline blends are required because 

some refineries and fuel terminals no longer sell gasoline for those 

markets, and that they have tended to pay higher prices in those areas. For 

example, one large independent retailer operating retail gas stations on the 

East Coast told us that the number of refineries producing gasoline for the 

market they serve fell from 12 to 3 after the introduction of special gasoline 

blends—leaving the retailer with fewer options to identify the lowest cost 

supplies. Special gasoline blends have also complicated the ability of some 

large entities to enter local gasoline markets. Officials with a large 

company that has entered several local gasoline markets across the 

country as an independent retailer told us that obtaining sufficient supplies 

at reasonable prices is more difficult in markets where special gasoline 
Page 34 GAO-05-421 Special Gasoline Blends

blends are used and that limited supply options have reduced the 

company’s ability to enter and compete in some of these markets. 

The plight of independent retailers is particularly pressing when traditional 

supplies are disrupted. The independent retailers that we spoke with said 

that their prices generally increase first and that they may not have access 

to fuel supplies provided to branded retailers if supplies are disrupted. 

Before special gasoline blends, these independent retailers were able to 

truck fuel in from nearby cities or neighboring states, however, because 

some gasoline blends may not be used anywhere else, or they may only be 

used hundreds of miles away, this is a more difficult and costly option 

today. For example, several industry officials noted that, if supplies of 

California gasoline are disrupted, they would expect prices to rise and that 

it could take weeks for additional supplies to arrive. They said that nearby 

suppliers capable of blending California’s gasoline blend are generally 

operating close to their full capacity. In the event that these supplies are 

disrupted, additional supplies generally come from Western Canada, the 

Gulf Coast, the Caribbean, or farther away, because there are only a few 

refineries capable of making this special gasoline blend and, as a result, 

supplies could take 3 weeks or more to arrive.

Areas That Use 

Uncommon Special 

Gasoline Blends Tend 

to Have Higher and 

More Volatile Gasoline 

Prices 

Among the 100 cities we examined, the highest wholesale gasoline prices 

tended to be found in cities that used a special gasoline blend not widely 

available in the region or that is more costly to make than other blends. 

Cities that are far away from major refining centers or other sources of 

gasoline also tended to have high prices. Prices also tended to be more 

volatile in cities having one or more of these characteristics. Other studies 

have also found higher and/or more volatile prices in some cities that use 

special gasoline blends. Greater complexity and higher refining, 

transportation, and storage costs associated with supplying special 

gasoline blends have likely contributed to increased gasoline prices overall, 

and for specific special blends, but it is not possible to conclusively 

determine the extent to which special gasoline blends have caused the 

higher prices and greater volatility found in specific cities. 

We Found Higher and More 

Volatile Gasoline Prices in 

Cities That Use Special 

Blends

We examined data from 100 selected cities to determine how prices varied 

across areas that use special gasoline blends versus conventional gasoline 

and found that, with some exceptions, the highest and most volatile 

gasoline prices tended to be found in cities that used special gasoline 
Page 35 GAO-05-421 Special Gasoline Blends

blends that are uncommon or particularly expensive to make, or in cities 

that are long distances from major refining areas. Each of these factors 

tends to isolate a city from the overall gasoline market by limiting the 

available supplies of gasoline from other areas in the event there is a supply 

shortfall in that city. 

With regard to special gasoline blends, the data show that most of the 20 

cities with the highest average prices over about the past 4 years 

(December 2000 through October 2004) used special gasoline blends, most 

of them formulated to meet stringent emissions standards. In many cases, 

these cities used a fuel that is not widely used outside their area, or in some 

cases is unique to that city or state. For example, the five California cities in 

the data set are all in the top 20 cities with respect to gasoline prices. 

California’s gasoline is the cleanest-burning gasoline and, in order to make 

it, California’s refineries have invested substantial capital in new refining 

processes. Further, only a few refineries outside of California routinely 

make California gasoline, the closest of which is in Northern Washington. 

The uniqueness of California’s gasoline has been noted by many sources as 

likely contributing to California’s high gasoline prices relative to the rest of 

the country. For the period we examined, the five cities we looked at in 

California had average prices ranging from about 24 to 26 cents per gallon 

more than the city with the lowest price (Meridian, Mississippi), which uses 

conventional gasoline and is located near the large refining center in the 

Gulf Coast. The table in appendix II shows the price data and gasoline 

blend types for each of the 100 cities we evaluated. Some of the cities with 

the highest prices used conventional gasoline year-round, but most of these 

are far from major refining areas or are located on or near a single smaller 

pipeline. Average prices in these top 20 cities were between 14 and 41 cents 

per gallon more than in the city with the lowest price. 

Using ethanol as an additive to gasoline is associated with higher wholesale 

gasoline prices. To evaluate this, we examined national average prices for 

gasoline blends containing ethanol. For example, for the nation as a whole, 

average prices for conventional gasoline with ethanol were about 4 cents 

per gallon higher than conventional without ethanol over the time period 

we analyzed. The switch to using ethanol, as opposed to MTBE, was also 

associated with higher gasoline prices.21 For example, in the years 

2001-2003, during which California phased out MTBE and phased in 

21As discussed in this report, the switch to ethanol from MTBE has largely been the result of 

MTBE’s tendency to contaminate ground water sources. 
Page 36 GAO-05-421 Special Gasoline Blends

ethanol, the average summer price of gasoline with ethanol was between 

about 4 and 8 cents per gallon more than the price of gasoline with MTBE. 

Similarly, over the period 2001-2004, the average summer price for federal 

reformulated gasoline with ethanol was between about 6 and 13 cents per 

gallon more than for federal reformulated gasoline with MTBE. 

In contrast to the highest-priced cities, the 20 cities with the lowest average 

wholesale gasoline prices over the period typically used common gasoline 

blends and/or were located near a major refining center—most often near 

the Gulf Coast, the largest refining center in the country in terms of both 

numbers of refineries and total refining capacity. For example, among the 

20 cities with the lowest prices, 8 used conventional gasoline—the most 

widely available gasoline blend. Conventional gasoline is used extensively 

across the United States, and most cities that use it are surrounded by 

areas using the same gasoline. Another 9 cities with the lowest prices used 

7.8 RVP gasoline—the most widely used of the special blends and the one 

formulated according to the least stringent emissions standards. Most of 

the 7.8 RVP gasoline is used in areas close to the Gulf Coast refining center. 

In addition, refiners told us that making 7.8 RVP gasoline is simpler and less 

costly than some of the other blends, so it may be more available from 

refineries in the event of a local supply shortfall. The other 3 cities with the 

lowest prices used less common special blends but are all close to the 

largest refining center, the Gulf Coast and, therefore, have many more 

potential supply options than more isolated cities do. 

We found similar results with regard to the volatility of gasoline prices.22

For example, 18 of the 20 cities with the most volatile prices used special 

blends of gasoline, and many of these cities were also among the 

highest-price cities. In contrast to the cities with relatively high price 

volatility, 17 of 20 cities with the lowest volatility use either conventional or 

7.8 RVP gasoline. However, while prices for special blends tend to be 

higher and more volatile than prices for conventional gasoline, available 

data did not allow us to attempt to isolate the effects of specific special 

gasoline blends on gasoline prices or to definitively establish a causal link 

between specific special blends and price volatility. Specifically, we did not 

have sufficient data to control for all other potential contributing 

22We measured volatility for each city as the standard deviation across time of the city price 

minus the price of West Texas Intermediate crude oil—a widely used benchmark for crude 

oil, the principle physical input into gasoline. A more detailed description of our 

methodology can be found in appendix I.
Page 37 GAO-05-421 Special Gasoline Blends

factors—such as the distance from cities to the sources of gasoline supply, 

or other specific features of these cities that might influence prices 

regardless of the blend of gasoline used. 

Other Studies Have Found 

Similar Results

We reviewed the literature associated with special gasoline blends and 

gasoline prices and found a number of studies done by government, 

academic, and private entities. The results and conclusions of these studies 

were largely consistent with our findings. For example, a recent EPA study 

found that high prices and price volatility are most acute in isolated 

markets, particularly those using special gasoline blends.23 The study also 

pointed out that some states had adopted specific gasoline blends in an 

attempt to use a blend that had a lower refining cost than federal 

reformulated gasoline. EIA also studied these blends and concluded, 

among other things, that the increasing number of distinct gasoline blends 

has reduced the flexibility of the supply and distribution system to respond 

to unexpected changes in supply and demand for gasoline. EIA further 

pointed out that, in some cases, states have chosen low RVP gasoline 

blends in an attempt to achieve lower gasoline prices than if they had used 

federal reformulated gasoline, and they inadvertently may have added 

strain to the distribution system, leading to greater potential for price 

volatility. A number of other academic and private studies found similar 

results. 

Special Gasoline Blends 

Contribute to Higher and 

More Volatile Prices, but 

Available Data Are 

Insufficient to Control for 

all Other Factors

There is a broad consensus among the experts and others we spoke with 

that the proliferation of special gasoline blends have contributed to 

increased and more volatile gasoline prices. The studies we reviewed also 

came to similar conclusions. Further, the greater complexity and higher 

refining, transportation, and storage costs associated with supplying 

special gasoline blends have almost certainly resulted in increased prices 

or volatility, either because of more frequent or severe supply disruptions, 

or because higher costs are likely passed on, at least in part, to consumers. 

For example, depending on the pipeline company, costs associated with 

downgrades or transmix are recovered from customers. At least part of 

these costs are, in turn, likely to be passed down the supply chain and 

eventually to consumers of gasoline. Similarly, the costs incurred to install 

23EPA Staff White Paper, Study of Unique Gasoline Fuel Blends (“Boutique Fuels”), Effects 

on Fuel Supply and Distribution and Potential Improvements, EPA420-P-01-004, Office of 

Transportation and Air Quality, U.S. Environmental Protection Agency: October 2001.
Page 38 GAO-05-421 Special Gasoline Blends

new processes to make special gasoline blends are likely passed on, at least 

in part, to consumers because refining companies would not make these 

investments without a reasonable expectation of a return on their money. 

While it is, therefore, almost certain that special gasoline blends have been 

a contributing factor to higher gasoline prices, it is not possible with the 

data available to us to conclusively determine the extent to which these 

blends have caused the higher prices and greater volatility found in specific 

cities or to rule out other potentially contributing factors. Such other 

factors may include specific supply infrastructure problems in or around 

these cities that would impact gasoline prices regardless of the blend. For 

example, state and industry officials in California told us that marine 

terminals for off-loading gasoline and other petroleum products are in 

short supply in California, which constrains the ability of suppliers in the 

state to receive these products from outside the state in the event of a local 

supply shortfall. These constraints would potentially contribute to higher 

gasoline prices regardless of which blend is used. Another potential factor 

that might influence gasoline prices independently of gasoline blends is the 

level of competition in the petroleum products industry. For example, in a 

recent GAO report, we found that oil company mergers had contributed to 

a 1 to 2 cent per gallon increase in conventional gasoline prices in the 1990s 

and as high an increase as 7 cents per gallon for California’s special 

gasoline blend. In addition, there may be other such factors at play that we 

do not observe, so we cannot definitively determine the precise extent to 

which observed prices are the result of the proliferation of special gasoline 

blends. 

Conclusions Special gasoline blends have reduced emissions and helped contribute to 

improved air quality in some parts of the country. Using special gasoline 

blends to achieve air quality standards is attractive to states; the blends 

offer immediate reductions in emissions from all vehicles already on the 

road by varying degrees. Unfortunately, EPA’s knowledge about the 

emissions generated when special gasoline blends are burned is outdated. 

Much has changed regarding vehicle and emissions control technologies 

since special gasoline blends, including those with ethanol, were last 

comprehensively tested in automobile engines. However, EPA and the 

states continue to rely on models built largely around these dated findings 

when evaluating whether to allow states to use special blends as a 

component in their efforts to improve air quality. Given the significant 

changes in vehicles and fuels, EPA should have better information about 

how the current fuels affect the vehicles currently on the road. In addition, 
Page 39 GAO-05-421 Special Gasoline Blends

Congress should have better information regarding the effectiveness of 

these blends, particularly those containing oxygenates such as ethanol, to 

aid in setting policy on fuel blends and the use of oxygenates. 

Although special blends have helped reduce emissions and improve air 

quality, the introduction of these blends appears also to have divided the 

gasoline market, converting what had been closer to a single national 

commodity market, into islands of smaller and more local markets for 

blends of gasoline that are typically not interchangeable. Because of 

octane, seasonal, and other differences, each additional special blend that 

is added can require pipelines and fuel terminals to handle several 

additional blends. Overall, this transformation of the gasoline market has 

complicated the supply infrastructure, increased production and delivery 

costs, and reduced the availability of gasoline, in some cases. The impacts 

of the proliferation of special gasoline blends are most evident when there 

is a disruption in the supply chain, such as when a refinery or pipeline is 

shut down. In these instances, localities using a blend different from the 

gasoline used in nearby areas must seek replacement supplies from farther 

away, leading to delays that likely cause higher and longer price spikes 

until these supplies arrive. Overall, it is likely that gasoline prices are higher 

now than they would be if gasoline were closer to a single commodity. 

In light of the opposing effects of environmental benefits and negative 

market implications, an ideal policy for approving the use of special 

gasoline blends would balance these effects. However, each decision 

involves trade-offs that all stakeholders may not value equally. Specifically, 

different stakeholders may attach varying degrees of importance to the 

environmental benefits or the impacts on gasoline supply infrastructure. 

Further, individual state actions that impact the entire regional supply 

infrastructure may not fully take those impacts into account or, in some 

cases, even accurately predict the impact on their own gasoline supply. 

With the 8-hour ozone rule and other regulatory changes likely to lead to 

more applications to use special gasoline blends, balancing the emissions 

effects of specific gasoline blends against the implications for supply and 

price will be even more important in the coming years. While EPA is 

currently authorized to approve state applications to use special gasoline 

blends, the agency cannot effectively weigh environmental and supply 

considerations because it does not have authority to deny state requests to 

use these blends on the basis of regional supply or price considerations and 

because its information on the environmental benefits is dated. 
Page 40 GAO-05-421 Special Gasoline Blends

Recommendation for 

Executive Action

To provide a better understanding of the emissions impacts of using special 

gasoline blends and these blends’ impacts on the gasoline supply 

infrastructure, we recommend that the EPA Administrator direct the 

agency to take the following four actions: (1) work with states and other 

stakeholders to comprehensively analyze how various gasoline blends 

affect the emissions of vehicles that comprise today's fleet, including how 

overall emissions are affected by the use of ethanol and other oxygenates; 

(2) use this updated information to revise the emissions models that states 

use to estimate the emissions and air quality benefits of these fuels and 

provide this information to Congress; (3) work with states, the Department 

of Energy, and other stakeholders to develop a plan to balance the 

environmental benefits of using special gasoline blends with the impacts on 

gasoline supply infrastructure and prices, and report the results of this 

effort to Congress; and (4) work with the states, the Department of Energy, 

and any other appropriate federal agencies to identify what statutory or 

other changes are needed to achieve this balance and report these findings 

to Congress and request that Congress provide these authorities to the 

appropriate federal agency or agencies. 

Agency Comments and 

Our Evaluation

We provided a copy of our draft report to EPA for comment. The agency did 

not comment on our findings or recommendations but did provide 

technical comments that we have adopted, as appropriate. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to other appropriate 

congressional committees and the Administrator of EPA. We also will make 

copies available to others upon request. In addition, the report will be 

available at no charge on the GAO Web site at http://www.gao.gov.
Page 41 GAO-05-421 Special Gasoline Blends

If you or your staff have any questions about this report, please contact me 

at (202) 512-3841 or wellsj@gao.gov. Contact points for our Office of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who contributed to this report are listed in 

appendix II. 

Jim Wells

Director, Natural Resources 

 and Environment
Page 42 GAO-05-421 Special Gasoline Blends

Appendix I

Scope and Methodology ApApenednxidexiIs

To determine the extent to which special gasoline blends are used in the 

United States and how, if at all, this use is expected to change in the future, 

we reviewed related literature, reviewed data on the use of these fuels, and 

interviewed government and other officials. Specifically, we reviewed 

reports on the presence and use of special gasoline blends by the 

Environmental Protection Agency (EPA), the Energy Information 

Administration (EIA), and others. We also examined data on the use of 

special gasoline blends provided by EPA, ExxonMobil (a commonly 

mentioned source of information on use of special gasoline blends), the Oil 

Pipeline Information Service, state environmental agencies and others. In 

addition, we interviewed federal and state government officials, academic 

and industry experts, and industry officials. Specifically, we interviewed 

officials with the EIA and EPA in Washington, D.C., as well as officials with 

EPA’s Office of Transportation and Air Quality in Ann Arbor, Michigan, and 

officials in each of the 10 EPA regional offices. We also interviewed 

representatives from industry trade associations including the American 

Petroleum Institute, the Renewable Fuels Association, the National 

Petrochemical Refiners Association, the Association of Oil Pipelines, the 

National Association of Convenience Stores, the Alliance of Automobile 

Manufacturers, and the Society of Independent Gasoline Marketers and 

with representatives from the National Governors Association. In addition, 

we interviewed academic and industry experts, and industry officials from 

companies involved in refining, terminal operations, and pipeline 

operations, as well as from large oil companies. We also conducted site 

visits in California, Louisiana, New Jersey, Pennsylvania, and Texas—states 

with large refining sectors and/or organizations with experience with 

producing and using special gasoline blends. 

To document what EPA and others have determined regarding the role of 

special gasoline blends in reducing vehicle emissions and improving overall 

air quality we reviewed related literature, interviewed federal, state, and 

other officials, and examined emissions estimates provided by EPA. 

Specifically, we examined reports on the emissions impacts of special 

gasoline blends done by EPA, the Auto/Oil Air Quality Improvement 

Research Program (AQIRP), National Research Council, state 

environmental agencies, and others. In addition, we interviewed federal 

and state government officials, academic and industry experts, and 

industry officials. Specifically, we interviewed federal officials at EPA and 

EIA, staff at state environmental offices, researchers associated with the 

National Academies of Science and the National Research Council, 

representatives from industry trade and health advocacy associations, 

including the American Petroleum Institute, the Renewable Fuels 
Appendix I

Scope and Methodology

Page 43 GAO-05-421 Special Gasoline Blends

Association, the National Petrochemical Refiners Association, the 

Association of Oil Pipelines, the National Association of Convenience 

Stores, the Alliance of Automobile Manufacturers, the Society of 

Independent Gasoline Marketers, and the American Lung Association. In 

addition, we interviewed academic and industry experts, and industry 

officials from companies involved in refining, terminal operations, and 

pipeline operations, as well as from large oil companies. To assess the 

reliability of emissions analyses, we reviewed the analyses’ overall design 

and methodologies, including assumptions and inputs to modeling. 

Automobiles emit a number of harmful pollutants; however, some have 

been identified as potentially more significant than others. The Clean Air 

Act authorizes EPA to mitigate potentially harmful concentrations of major 

criteria pollutants, including carbon monoxide (CO), nitrogen dioxide 

(NO2), sulfur dioxide (SO2), ozone (O3), particulate matter (PM) and lead 

(Pb). GAO focused its analysis on VOC, NOX—important precursors to 

ozone—and CO emissions because the transportation sector is responsible 

for a large fraction of VOC, NOx, and CO emissions in the United States 

and, as a result, the Clean Air Act and EPA have specified the reduction of 

these pollutants through fuel control programs.

To identify what effects, if any, special gasoline blends have on gasoline 

supply in the United States, we examined literature reporting on the effects 

of special gasoline blends on gasoline supply, interviewed government 

officials and a wide cross section of industry participants. Specifically, we 

interviewed agency officials with EPA, EIA, the Federal Trade Commission, 

and state regulatory agencies. In addition, we interviewed representatives 

from industry trade associations, including the American Petroleum 

Institute, the Renewable Fuels Association, the National Petrochemical 

Refiners Association, the Association of Oil Pipelines, the National 

Association of Convenience Stores, the Alliance of Automobile 

Manufacturers, and the Society of Independent Gasoline Marketers. We 

also interviewed petroleum industry officials from companies involved in 

refining, terminal and pipeline operations, and marketing, including 

interviews with senior industry officials from several integrated oil 

companies such as ExxonMobil, ChevronTexaco, five operators of large 

pipeline systems that carry multiple gasoline blends, several operators of 

terminals, and three large independent marketers of gasoline that buy 

wholesale gasoline and sell it to retail customers. We also conducted site 

visits in California, Louisiana, New Jersey, Pennsylvania, and Texas—states 

with large refining sectors and/or organizations with experience with 

producing and using special gasoline blends. 
Appendix I

Scope and Methodology

Page 44 GAO-05-421 Special Gasoline Blends

To determine how these blends affect gasoline prices, we examined the 

literature on gasoline prices, interviewed industry officials and experts, and 

analyzed wholesale gasoline price data. We reviewed reports on the use of 

specials gasoline blends and gasoline prices done by EPA, EIA, and others. 

We also interviewed government officials and industry experts including 

federal officials at EPA and EIA; staff at state environmental offices; 

academic and industry experts; petroleum industry officials from 

companies involved in refining, terminal operations, and pipeline 

operations, as well as from large oil companies; and representatives of 

trade associations. 

In addition, we evaluated data on wholesale gasoline prices in 100 cities 

provided by the Oil Price Information Service (OPIS), as well as data on 

national average prices1

 from the same source—these national data 

covered all the terminals in the country for which OPIS collects data. The 

data were weekly average prices from terminals selling gasoline at 

wholesale and covered the period from December 2000 through October 

2004. In choosing which cities to evaluate, we first selected all cities on 

major pipelines. Then we selected the largest cities in each state and in 

each contiguous area that used a special gasoline blend. In so doing, we 

chose at least one such city from each contiguous area in the United States 

that we determined used a special blend of gasoline. Then, we chose cities 

in areas that use conventional gasoline, using similar criteria—every 

conventional-gasoline city chosen was the largest city in its respective state 

that was on a major pipeline. We did not estimate an econometric model to 

try to isolate the effects of specific special blends because we felt we 

lacked sufficient data to control for all other potential contributing 

factors—such as specific features of these cities that might influence prices 

regardless of the blend of gasoline used or the degree of competitiveness in 

the gasoline supply industry. Instead, we ranked the 100 cities according to 

the mean of their gasoline prices to determine if there were consistent 

patterns with respect to areas that use special gasoline blends versus areas 

that use conventional gasoline. To calculate the mean, we first created 

price differentials between each week’s price in each city and the price per 

gallon of West Texas Intermediate crude oil—a commonly used benchmark 

for world crude oil prices. These crude oil prices came from Platts, a 

1

Wholesale prices are the prices reported by fuel terminals and did not include any relevant 

taxes. According to OPIS, in some cases fuel terminals may have reported tax credits 

available for ethanol fuels in the prices that they reported, but they acknowledge that past 

reporting may be inconsistent in this regard.
Appendix I

Scope and Methodology

Page 45 GAO-05-421 Special Gasoline Blends

common source for crude oil and petroleum product prices. For each city, 

we performed a statistical test comparing the average prices between each 

city and two comparison cities in Texas2

. 

We also ranked the cities according to the standard deviations of their 

prices over time and looked for similar patterns. To calculate the standard 

deviations, we again created price differentials between each week’s price 

in each city and the price per gallon of West Texas Intermediate crude oil. 

Creating a differential between gasoline and crude oil prices controls for 

some volatility in gasoline prices that is caused by changes in the price of 

crude oil, the fundamental raw material input in gasoline. Then, we 

calculated the standard deviation over time for each city for these price 

differentials. The standard deviation is a common measure of the 

variability of data and, in this case, is a measure of how much the prices in 

each of the cities varied over time, controlling for crude oil prices. For 

each city, we performed a standard test for statistical significance of the 

difference of the variability between that city and the city with the lowest 

standard deviation.3

2

Specifically, we performed a sign test. See, for example, R.V. Hogg and A. T. Craig, 

Introduction to Mathematical Statistics. 4th ed. (New York: Macmillan, 1978): 312-314. 

We use the sign test because it tests the equality of matched pairs of observations without 

imposing further assumptions on the underlying distributions. The results of this test 

showed that all the highest 20 city prices were statistically significantly greater than in the 

low price comparison city. 

3

H. Levene, “Robust tests for equality of variances,” ed. I. Olkin, Contributions to 

Probability and Statistics (Palo Alto: Stanford University Press, 1960): 278-292. We use the 

Levene test because the conventional F test is very sensitive to the assumption that the data 

are drawn from a Normal distribution, an assumption that does not necessarily hold for the 

gasoline price data. This test indicated statistical significance for the difference between the 

variances of most of the highest volatility cities compared to the lowest volatility city. 
Page 46 GAO-05-421 Special Gasoline Blends

Appendix II

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Jim Wells (202) 512-3841

Staff 

Acknowledgments

In addition to the individual named above, Mark Bondo, Jon Ludwigson, 

Kristen Massey, John Mingus, Cynthia Norris, Frank Rusco, Barbara 

Timmerman, and Kim Wheeler-Raheb made key contributions to this 

report. In addition, important contributions were made by Diane Lund, 

Dawn Shorey, and Mary Welch. 

(360504)
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