[Congressional Record (Bound Edition), Volume 152 (2006), Part 5]
[Senate]
[Pages 7180-7181]
[From the U.S. 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.

[[Page 7181]]

  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 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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