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Government Report Says Ethanol Is Factor In Midwestern Gas Prices

26 June 2000

New Federal Government Report Cites Use of Ethanol As Contributing Factor in Sky High Midwestern Gasoline Prices

    ARLINGTON, Va. - A new report issued by the Congressional Research Service 
cites the use of ethanol in reformulated gasoline as a significant contributing 
factor to the highly inflated cost of reformulated gasoline in Chicago and 
Milwaukee.

    The report, issued on June 16, 2000, states "New requirements for Phase 2
of (the RFG) program, which took effect June 1, 2000, have made it more
difficult and costly to make RFG with ethanol."

    The report also notes that ethanol has a much higher volatility than MTBE.
Accordingly, in light of heightened fuel volatility requirements under new
federal guidelines, refiners attempting to blend RFG with ethanol and not
MTBE, are now forced to use base material with a much lower volatility than
they would otherwise.

    Because this low volatility base material is difficult to manufacture and
in relatively short supply, the costs associated with using it solely to
accommodate ethanol, drive up the price of the end product, gasoline.
According to Oxygenated Fuels Association (OFA) spokesperson, David Liddle,
"The CRS report found that RFG in Chicago and Milwaukee is at least 50 cents
above RFG prices elsewhere.  If RFG with ethanol can't work in Chicago and
Milwaukee where ethanol is produced, what does that tell us about trying to
roll it out nationally? I think this proves conclusively that ethanol is not
ready for prime time."

    Liddle stated, "The ethanol industry is fleecing the citizens of this
country.  Through its massive, fifty-four cents per gallon federal subsidy, it
has its hands in the taxpayers' pockets on the production end, and now the
Congressional Research Service has shown beyond the shadow of a doubt that it
is siphoning money from the wallets of consumers at the pump.  The situation
is unconscionable."

    In a press release accompanying the CRS report, the U.S. House of
Representatives Committee on Science notes that the CRS report estimates as
much as twenty-five cents of the inflated price of gasoline in the
Chicago/Milwaukee region can be attributed to the "unique RFG situation" in
Chicago and Milwaukee.

    Liddle commented, "What makes the RFG situation in Chicago and Milwaukee
unique is that, unlike almost every other RFG market in America, Chicago and
Milwaukee use ethanol instead of MTBE.  MTBE has proven itself to be not only
more effective at achieving air quality goals than ethanol, but also more cost
efficient than ethanol -- and MTBE doesn't enjoy the massive fifty-four cents
per gallon taxpayer-funded subsidy that props up the ethanol industry."