From: Reuters
Published May 5, 2008 05:17 PM

Ethanol waiver seen spiking gasoline $1/gallon

NEW YORK (Reuters) - A proposal by Texas Gov. Rick Perry to waive half of the renewable fuel standard for ethanol has raised the ire of some ethanol proponents, who say it could add more than a dollar per gallon to the cost of gasoline across the country.

"The impact on gasoline prices, if you take 4.5 billion gallons of ethanol off the market today, if (Texas) Governor Perry gets his way, is significant," said Bob Dineen, president of the Renewable Fuels Association, an ethanol industry group.

U.S. Congress passed a 2007 law requiring a production increase to 15 billion gallons of corn ethanol by 2015 and 36 billion gallons by 2022. Perry and others, citing rising food prices, have said those rules should be relaxed in order to inject more corn into the food supply for livestock and to encourage farmers to plant other crops.

An ethanol waiver would likely drive up gasoline prices to $4.71 per gallon, a level that would have a "devastating" impact on consumers and push food prices even higher, Dineen said.

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"It would kill consumers," John Urbanchuk, the director of industry analysis group LECG, said of the ethanol mandate waiver.

"It would add a bit over $1.10 a gallon to gasoline in the short term because you've got to go out and replace that 4.5 billion gallons of ethanol."

In late April, Perry asked the U.S. Environmental Protection Agency to waive the ethanol requirement for Texas, the largest gasoline-producing state, in order to ease rising food costs.

At the time, Perry said the federal ethanol mandate was "misguided" and was significantly increasing the size of Texan families' food bills.

Texas is the first state to petition the EPA for a waiver from the ethanol mandates, but it is not the only state that has recently considered rolling back mandates supporting ethanol production as concern rises over high food costs.

Missouri is mulling the reversal of a state mandate, which took effect in January, requiring gasoline sold throughout the state to contain 10 percent ethanol.

In Virginia, a proposal to request a waiver was shot down by Gov. Timothy Kaine.

(Reporting by Rebekah Kebede, editing by Matthew Lewis)

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