President Offers Vocal Support for Lowering Ethanol Import Barriers
President Bush says lowering ethanol import barriers may lower gas pump prices.
Compiled by staff
Published: May 5, 2006
In a meeting with lawmakers discussing ways to lower gas prices at the pump, President Bush voiced support for exploring ways to reduce barriers to the importation of ethanol.
Some analysts have suggested that the secondary tariff (54-cent per gallon) on imported ethanol should be removed, as least temporarily, to augment domestic supplies. Some senators at the meeting voiced concern of the methyl tertiary butyl ether phase-out and ethanol's replacement. No final consensus was made on lowering tariffs, but Senate Energy and Natural Resources Chairman Pete Domenici says there was certainly talk about making ethanol easier to import.
Statements from the Renewable Fuels Association explain that removing the tariff means American taxpayers would be subsidizing Brazilian ethanol production. RFA states U.S. gasoline refiners receive a 51 cent tax incentive for every gallon of ethanol they blend into gasoline, regardless of the ethanol's origin. So, imported ethanol from Brazil, for instance, qualifies for the tax incentive.
"Brazil has built its ethanol industry through 35 years of tax incentives, production subsidies, mandates, export enhancement, infrastructure development, debt forgiveness and currency devaluation," RFA says. "Brazil does not need U.S. tax dollars to compete effectively, as evidenced by the fact 135 million gallons were imported last year and those volumes are increasing."
The group also says gasoline prices will not be affected by removing the secondary tariff on imported ethanol. "Imported ethanol represents just a fraction of the ethanol used to replace MTBE, and ethanol itself represents just 3% of U.S. motor fuel supplies," RFA adds. "The factors truly driving the price of gasoline higher have nothing to do with ethanol supplies. Record crude oil prices, tight refining capacity, lower gasoline production, lower gasoline imports and limited expansion of domestic refining expansion all play a much greater role than the supply of ethanol in today's higher gasoline prices."
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