Boutique Fuel Markets and Security-Environment-Economic Trade-offs

Since the emergence of boutique fuel regulations 25 years ago, U.S. gasoline markets have been segmented based on fuel content regulations, which make these markets less resilient to supply shocks because neighboring markets do not have regulation-compliant fuels to export to those experiencing a shock. Hurricanes have knocked out refineries and pipelines resulting in supply shocks to markets "at the end of the pipeline" far from the direct impacts of the storms. Aldy investigates the impacts of EPA authority to waive these regulations – which has occurred approximately 60 times since 2005 – on local air quality, public health outcomes, and fuel prices. These analyses can inform a welfare analysis of policies that temporarily suspend air quality regulations relative to other interventions to address supply shocks, such as product-based strategic petroleum reserves.

Speaker: Joseph Aldy, Harvard University