Putting a Bureaucrat in Your Tank: Gasoline Markets and Regulation

Summary

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Production costs in the newly opened fields overseas were low enough that it was soon cheaper to import crude oil and refine it in U.S. refineries than it was to use domestic oil.\n As the number of formulation requirements increased they came to be known as "boutique fuel requirements" because they made it impossible to sell gasoline formulated for Tucson in Phoenix.

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Putting a Bureaucrat in Your Tank: Gasoline Markets and Regulation

If you run a barrel of crude oil through a still, the technique used by the earliest refineries and still a stage in modern refining, it separates into various fractions, including kerosene, gasoline, diesel, fuel oils, waxes, and asphalt. Without further processing, about 10 percent will be "straight run" gasoline. In the 1870s this 10 percent was a waste product from kerosene refineries, frequently dumped in streams because the explosive liquid had no known uses. John D. Rockefeller's Standard oil Co. unsuccessfully experimented with gasoline stoves, trying to create a market for gasoline. By 1910, however, the nation faced a gasoline shortage as demand from the growing number of automobiles outstripped refinery production. Market forces transformed gasoline from a useless byproduct into a valued commodity.

Responding to the increased demand, private entrepreneurs funded the development of cracking technology. This method of transforming one set of hydrocarbons into another increased the proportion of the most-valuable products. On average 100 barrels of crude yielded 75.2 barrels of kerosene and 10.3 barrels o...

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