NEW YORK -- Crude oil in New York tumbled to a seven-week low after Energy Secretary Spencer Abraham said the United States is ''seriously" considering a request by California for an exemption to a requirement for cleaner-burning gasoline.
California and New York have asked for temporary waivers of rules to use additives that make gasoline burn more completely. The states, along with Connecticut, have banned MTBE, a blending agent, sparking concern that a change to ethanol, its chief alternative, may create supply disruptions. ''The gasoline supply situation has been a big concern all year," said John Kilduff, senior vice president at Fimat USA Inc. in New York. ''The administration has the power to wave a wand and relieve some of the pressure. It looks like it has finally decided to consider it."
Crude oil for May delivery fell $1.49, or 4.2 percent, to settle at $34.27 a barrel on the New York Mercantile Exchange. Prices were up 15 percent from a year earlier when US forces were attacking Iraq's Republican Guard defending Baghdad.
Gasoline for May delivery fell 5.91 cents, or 5.2 percent, at $1.0759 a gallon in New York.
''It's my understanding the EPA is seriously looking at this request," Abraham said in testimony before the House Energy and Commerce Committee.
Crude oil prices had declined in earlier trading on expectations that US inventories will be adequate to meet demand from refiners making gasoline.
''The waiver, if granted, could be the wedge that gives refiners the flexibility to meet gasoline demand this summer," said Jim Steel, director of commodity research at Refco Inc. in New York.
This year's oil rally helped push US gasoline pump prices last week to a record $1.758 a gallon, increasing pressure on President Bush to bring down energy costs.