[Congressional Record Volume 152, Number 53 (Friday, May 5, 2006)]
[Senate]
[Pages S4106-S4107]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MORNING BUSINESS
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THE RISING COST OF GASOLINE
Mr. GRASSLEY. Mr. President, I would like to speak on a matter that
has gotten a lot of attention lately, and for good reason. The rising
cost of gasoline is hitting all Americans hard. Families, businesses,
farmers, and truckers are all hurting as the cost escalates out of
control.
With gas prices now hovering around $3 a gallon, everyone in Congress
is looking for a solution or for someone to blame. Unfortunately, some
have chosen to pinpoint ethanol as the culprit. However, blaming
ethanol for the costs at the pump ignores the fact that crude is at
near record highs, and our country is still suffering from a strained
domestic refining industry.
Around the country, gasoline refiners are making a voluntary decision
to remove MTBE, a gasoline additive, from the market. In its place,
they are using ethanol. So, ethanol is currently being blended for the
first time in many parts of the East Coast and in Texas.
Because of the new demand for ethanol, some of my colleagues have
begun to argue that there is a shortage and that it is responsible for
the rising cost of gasoline. They look to increased imports of ethanol,
and the lifting of the import tariff, as the solution. Let me be clear:
there is no shortage of ethanol. And, ethanol is a tiny fraction of
cost of gasoline.
You don't have to take my word for it. Guy Caruso, Administrator of
the Energy Information Administration of the Department of Energy,
recently stated that the 10 percent blend of ethanol is affecting
prices by ``just a few pennies.'' Ethanol's role in gasoline prices is
a tiny fraction of the overall increase.
I would like to address the claim that there is a shortage of
ethanol. According to the Energy Information Administration, 130,000
barrels per day of ethanol are needed to replace MTBE. Last month,
302,000 barrels of ethanol were produced each day. That seems to me
like it is enough to meet the demand. There is also 25 days of ethanol
supply in storage.
Have there been some transportation issues surrounding the transition
from MTBE to ethanol? The answer is yes, and they're being dealt with.
Sufficient supplies of ethanol are where they need to be. There is no
shortage of ethanol.
If there is no shortage, what good does it do to eliminate the import
tariff on imported ethanol? None. Domestic supplies are sufficient.
Lifting the tariff won't have an impact on gas prices because the
only other major producer of ethanol--Brazil--simply doesn't have
enough ethanol to export at significant levels at this time. I know
this issue well. I was in Brazil just six weeks ago, and one thing I
heard over and over was that Brazil is experiencing an ethanol
shortage.
Shortages of ethanol in Brazil are being driven by strong demand for
ethanol in that country. Looking at the longer term, USDA analysts in
Brazil are reporting that Brazil is anticipating even higher demand for
ethanol later this year and in 2007.
Given low supplies in Brazil, there has even been talk of importing
ethanol into Brazil.
I would like to point out something else. Brazil and other countries
can already ship duty-free ethanol to the United States. They don't
have to pay the U.S. tariff. Under the Caribbean Basin Initiative,
Brazilian ethanol that is merely dehydrated in a Caribbean country can
enter the U.S. market duty-free up to 7 percent of the U.S. ethanol
market. That's generous access, but Brazil has never even come close to
hitting the 7 percent cap.
And it isn't that the Caribbean countries don't have the capacity to
dehydrate more Brazilian ethanol. They do.
As we're already providing duty-free access for Brazilian ethanol
shipped through Caribbean countries, and as Brazil isn't taking full
advantage of this duty-free treatment, I don't know why we should bend
over backwards to provide even more duty-free access for Brazilian
ethanol.
I especially don't know why we should do this given Brazil's stance
in the Doha Round negotiations of the World Trade Organization. Brazil
is the leader of the G-20 negotiating group in the WTO negotiations, a
group that is resisting our efforts to obtain improved market access
for U.S. products around the world.
In addition, the Brazilian government intervenes extensively in the
price and supply of ethanol in that
[[Page S4107]]
country. But the U.S. tariff on ethanol operates as an offset to an
excise tax credit that applies to both domestically produced and
imported ethanol. So by lifting the tariff, we would in effect be
giving the benefits of a U.S. tax credit to subsidized Brazilian
ethanol.
Providing yet more duty-free treatment for Brazilian ethanol would
send the wrong signal to those Americans who are devoting their careers
to help America become more energy independent. The U.S. ethanol
industry is working every day to lessen our dependence on foreign oil.
This is a virtue that President Bush has touted again and again.
Just last week the President restated his goal to replace oil from
around the world by expanding the use of U.S. ethanol.
The President stated:
The federal government has got a role to play to encourage
new industries that will help this nation diversify away from
oil. And so we're strongly committed to corn-based ethanol
produced in America.
The President clearly understands the need to assist our domestic
ethanol industry so that they can get a foothold and succeed. Why would
the United States want to send a signal that we're backing away from
our efforts to seek energy independence by promoting renewable fuels in
the United States?
We're already dependent on foreign oil. Surely, President Bush
doesn't intend for our nation to go down the path of eventually
becoming dependent on foreign ethanol also. Providing yet more duty-
free treatment would be a step in the wrong direction. I don't think
our country should take any action that would harm the farmers and
investors in rural America that have worked so hard to develop this
industry. The efforts to reduce our dependence on foreign oil have only
just begun.
Providing more duty-free treatment for ethanol won't increase
supplies or reduce prices at the pump. It's a bad solution in search of
a problem. It's a bad idea for our energy independence and our national
security.
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