Bush Delivers Mixed Message of Support for Ethanol

With oil trading consistently at well over 70 dollars a barrel and those prices reflected at every local gas station, President Bush delivered a speech on Tuesday outlining his recommendations to alleviate this price pressure. His speech was widely heralded by the renewable energy industry for its upbeat assessment of renewables, especially biofuels, but it fell short of calling for any major new plans on renewables. And in an ironic twist, it may lead to some disappointment from the ethanol industry.

The speech was delivered to an invitation-only audience of the Renewable Fuels Association, the ethanol industry’s major association. Many in the enthusiastic crowd saw the speech as emblematic of a larger shift from the White House which has shown itself steadily more willing to support renewable energy technologies. “The ethanol industry is booming,” President Bush said. “Last year America used a record 4 billion gallons of ethanol. There are now 97 ethanol refineries in our country, and nine of those are expanding. And 35 more are under construction. The ethanol industry is on the move, and America is better off for it.” Despite the glowing support for ethanol and biodiesel, Bush didn’t make any specific recommendations regarding renewable energy that would increase its use. His major announcements included temporarily halting the federal government’s oil purchases that are diverted to the Strategic Petroleum Reserve. “Our strategic reserve is sufficiently large enough to guard against any major supply disruption over the next few months,” President Bush said. “So by deferring deposits until the fall, we’ll leave a little more oil on the market. Every little bit helps.” He also directed Congress to expand current law allowing tax breaks for hybrid electric vehicles. Currently these tax credits apply to only a limited number of hybrid and clean diesel vehicles for each manufacturer. If the automakers sell more than their limit, 6000 vehicles, new purchasers are not eligible for the full tax credit. The President called for the credits to be made available for an unlimited number of vehicles. One of the few areas where Bush proposed something specific and immediate regarding renewable energy left a few people scratching their heads. In many parts of the country, to improve air quality, gasoline blends are required to contain an oxygenate. Before it was found to be a potent ground contaminant, MTBE played this role. Since many states enacted bans on it, ethanol has been the transition oxygenate of choice. President Bush said state and local officials in some parts of the country worry about supply disruption in the short term because of ethanol as an oxygenate and they worry that ethanol won’t meet the necessary demand for this switch. All this, he says, is contributing to the price of gasoline going up. “And some (state and local officials) have contacted us to determine whether or not they can ask the EPA to waive local fuel requirements on a temporary basis,” President Bush said. “And I think it makes sense that they should be allowed to. So I’m directing EPA Administrator Johnson to use all his available authority to grant waivers that would relieve critical fuel supply shortages.” This was a point not lost on members of the audience. In effect, the President delivered a speech to an ethanol industry audience calling for a halt to the very same ethanol policies that have been almost singularly responsible for rapid growth in the industry over the past couple years. “That left me scratching my head too, that’s something we wouldn’t advocate at all,” said Brian Jennings, Executive Vice President of the American Coalition for Ethanol (ACE), another major ethanol industry trade association. “To grant a waiver at this time would be a setback for the marketplace. If indeed that would occur it would be very disappointing.” Jennings added that to grant the waiver would be to reward the petroleum companies for their “bad behavior” in not planning ahead and making a smooth shift over to the ethanol oxygenate. He says they have been acting unilaterally in an uncoordinated effort that has complicated the shift. Either way, the ethanol industry has strongly refuted this shift as playing a big role in oil prices. They say barrels of crude trading at well over $70 a barrel are the real factor. And energy experts have largely dismissed the President’s speech and his suggestions as offering little relief at the gas pump anytime soon. There is near consensus on the fact that gasoline and oil prices are governed by a complicated global market far beyond the sway of any president.
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