NCPA - National Center for Policy Analysis


May 10, 2006

Arizona Congressman John Shadegg is the first politician of note to propose a good idea in response to increased energy costs: the suspension of outrageously high tariffs on imported ethanol, says the Wall Street Journal.

The intent is to offset some of the gas price hikes that Congress has caused via the ethanol mandate it passed last year. That requirement -- that drivers use 7.5 billion gallons of ethanol annually by 2012 -- is currently helping to increase the cost of gas, since ethanol is in short supply, says the Journal.

Compounding the problem are the taxes and tariffs placed on ethanol imports, including:

  • A 2.5 percent tariff on imported ethanol.
  • A second duty of 54-cents-a-gallon placed on all ethanol.

Shadegg's bill would suspend the taxes on imported ethanol until 2007. Not only would this result in a new flow of ethanol in a tight market, it would give the gas industry time to prepare its infrastructure to handle new domestic ethanol requirements, explains the Journal.

One irony of the current gas panic is that big oil companies are being pilloried for their profits, but domestic ethanol producers get a pass. Yet the ethanol makers receive more government subsidies and are responsible for far more of the current gasoline price spike. Congress doesn't have to bash ethanol makers; all it has to do is allow more foreign supply, which will do more to reduce gasoline prices more quickly than any other single idea, says the Journal.

Source: Editorial, "A Good Gas Idea," Wall Street Journal, May 8, 2006


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