Higher pump prices ahead

Consumers will likely be paying higher prices at the gas pump in coming years as new federal regulations to reduce sulfur in gasoline begin to take effect in 2004, according to a new report from Fitch Ratings. The gasoline regulations will be followed by new on-road diesel rules in 2006 and then off-road diesel changes by the end of the decade. The costs to meet the regulations are high, with U.S. petroleum refiners alone expected to invest over $10 billion for just the gasoline and on-road diesel regulations, according to Fitch. In its report, Fitch said it expects U.S. refiners to ultimately benefit from the increasingly stringent regulations as refined product supply is removed from the market. Despite a deferral period for some refineries to convert, some less competitive refiners will still be unable to meet the new regulations and will shut down their facilities. Refinery closures translate into a drop in production, creating demand in the surviving refineries, Fitch said.