Opinion
Why the Ethanol Import Tariff Should be Repealed
- By Brian J. Donovan
- Aug 08, 2008
The Ethanol Import Tariff should be repealed for the following reasons:
(a) Record prices for gasoline are increasing the costs of producing, transporting, and processing food products. Research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute to a 5.2 percent increase in retail food prices.
(b) Imported petroleum does not pay a tariff, yet clean, renewable ethanol from our own hemisphere is assessed a 54 cent-per-gallon tariff.
(c) Elimination of the ethanol import tariff would provide the United States with sufficient ethanol to move ethanol demand beyond being just a blending component in gasoline to a truer fuel alternative and create the required fueling infrastructure.
(d) The Energy Independence and Security Act of 2007 sets a new Renewable Fuels Standard that starts at 9 billion gallons of renewable fuel in 2008 and rises to 36 billion gallons by 2022. Of the latter total, 21 billion gallons of renewable fuel in U.S. transportation fuel is required to be obtained from renewable fuel, other than ethanol derived from corn.
(e) U.S. oil companies, due to a loophole in the Caribbean Basin Initiative, are currently allowed to import thousands of barrels of ethanol every month without having to pay the 54-cents-per-gallon tariff.
At a time of record high gas prices, repeal of this tariff on foreign ethanol would create market competition by allowing U.S. blenders to purchase cheaper ethanol from foreign sources, which could help lower gas prices, increase the supply of ethanol to coastal markets, and ease the economic strain that is impacting the agriculture, food, and beverage industries.
U.S. oil companies, corn farmers, and fertilizer producers are benefiting from the import tariff on foreign ethanol at the expense of the average American consumer. At a time when our own government’s Federal Reserve Chair is saying food inflation and fuel costs are contributing to our dangerous economic condition, working toward eliminating this barrier to free market competition is more needed than ever.
For the full text of this article, visit the Renergie Weblog at www.renergie.wordpress.com
About the Author
Brian J. Donovan, an attorney and engineer with 33 years of international business experience, is chief executive officer of Renergie, Inc. Renergie was formed on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of 10 ethanol plants in the parishes of the state of Louisiana that were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce and market non-corn ethanol locally.