Bodman Says U.S. Gasoline Supply Problems Have Eased (Update2)
2006-05-09 13:07 (New York)
(Adds discussion of Bush's proposal to lift ethanol tariff
in second and eighth to 14th paragraphs.)
By Jim Efstathiou Jr.
May 9 (Bloomberg) -- U.S. Energy Secretary Samuel Bodman
said the switch from MTBE to ethanol in U.S. gasoline is complete
and the supply disruptions related to the change should be over.
Refiners have phased out MTBE in favor of ethanol because of
changes in fuel rules in George W. Bush's energy bill, which
became law in August. Bodman, speaking in Alexandria, Virginia,
also said that a proposal Bush raised last week to drop a tariff
on ethanol from Brazil is still being studied.
The average U.S. gasoline pump price jumped about 17 percent
last moth, in part because of concern that the switch in fuel
additives would cause shortages. Ethanol is transported by truck,
barge and train to distribution points where it is mixed into
gasoline, while MTBE-blended fuel was shipped from refineries by
pipeline as a finished product.
``To my knowledge, MTBE has been phased out in its entirety,
and we are now operating with total dependence on ethanol,''
Bodman said. Logistical problems related to shipping ethanol have
been addressed, he said. ``To my knowledge, things have settled
down and the transportation system is now working pretty
smoothly.''
MTBE, or methyl tertiary butyl ether, that leaked from
underground storage tanks fouled drinking water and spawned
lawsuits against refiners and chemical makers. Refiners were
trying to complete the phase-out of MTBE by last week.
Running Dry
The changeover led to gasoline supply disruptions at dozens
of filling stations in Texas and in eastern states from Virginia
to New Jersey last month. The disruptions came partly because
tanker trucks that normally deliver gasoline to filling stations
were used to haul ethanol to regional terminals, according to
Valero Energy Corp., the biggest U.S. refiner.
Bodman said he had not heard recently of any shortages
affecting filling stations. ``They seem to be doing better.''
Bush on May 5 said dropping the 54-cent-a-gallon tariff on
ethanol imports might be appropriate to make more ethanol
available for the U.S. market. Senate Finance Committee Chairman
Charles Grassley, a Republican from Iowa, said dropping the
tariff won't lower gasoline prices because Brazil does not have
enough ethanol to export ``at significant levels.''
The energy department is evaluating ``what the impacts would
be on ethanol supplies,'' Bodman said. ``Would it aid near term?
Would it aid longer term?''
Ethanol Tariff
The U.S. imported about 130,000 gallons of ethanol in 2005,
which is less than half the amount that is allowed duty free
under existing rules, said Matt Hartwig, a spokesman for the
Renewable Fuels Association. Refiners used about 4 billion
gallons of ethanol last year.
``As a general matter, the President has expressed interest
in it and is prepared to work with Congress on it,'' Bodman said.
The tariff has produced ``significant benefits in terms of
generating good financial returns in the ethanol industry. That's
why we're seeing so many plants being built, so that's part of
what we are in the process of working on.''
Senator Dianne Feinstein, a California Democrat, and
Senators Jon Kyl of Arizona and John Sununu of New Hampshire,
both Republicans, introduced legislation yesterday that would
strike the ethanol tariff.
``We ought to leave the tariffs in place,'' Senator Ken
Salazar, a member of the Senate Energy & Natural Resources
Committee, said today in an interview in Washington.
``We need to give our infant industries a greater chance to
grow,'' said Salazar, a Colorado Democrat. Colorado now has about
a half-dozen ethanol plants operating or under construction,
Salazar said, up from a single plant a year ago.
