High Gas Price Drives Record-Breaking Demand for Ethanol in Iowa
Posted on: Friday, 12 August 2005, 00:00 CDT
Aug. 10--DES MOINES -- Another month. Another ethanol record.
E10, which is 10 percent the corn-based fuel and 90 percent gasoline, had a 77.6 percent market share at Iowa gas stations in June, the fourth time this year the monthly share climbed to a new record, according to the Iowa Department of Natural Resources, or DNR.
Iowans bought 107 million gallons of E10 in June, also a record high.
The record-breaking results can be traced to aggressive government subsidies and a growing acceptance of ethanol as a viable fuel alternative.
"I think we've got a superior product and we're marketing that product better," said Senate Republican Leader Stewart Iverson of Dows.
The market share for E10 more than doubled from 29 percent in 1986 to 66 percent last year. The total gallons sold rose from 385 million in 1986 to nearly 1.1 billion last year.
Gov. Tom Vilsack, a Democrat, noted the records Monday as he outlined the ethanol promotions planned for the Iowa State Fair.
There will be an appearance by Indy Racing League driver Paul Dana, whose racing team is sponsored by the ethanol industry. The league has committed to using ethanol-blend fuels at all IndyCar Series races starting next year.
"We're trying to encourage NASCAR to do the same," Vilsack said.
But the biggest reason ethanol's rapid rise is likely state and federal tax subsidies, which make the fuel cheaper for producers, gas station owners and drivers.
At the state level, gas stations get a half-penny-per-gallon tax break if more than 60 percent of the fuel sold contains ethanol.
The state tax on E10 is 19 cents per gallon, which is 1.7 cents less than the tax for regular gasoline.
However, if the annual market share for E10 exceeds 75 percent --- which it might this year if trends continue --- the tax break will shrink by a fraction of a cent starting next July.
Critics of the subsidies, few of whom are in corn-producing states like Iowa, say taxpayers are getting fleeced. But ethanol backers say the fuel helps reduce dependence on foreign oil and burns cleaner than regular gasoline.
Ethanol usage is spiking at a time when America's capacity for ethanol production is also on the rise. The federal energy bill signed Monday by President Bush sets standards that should lead to the annual production of 7.5 billion gallons of alternative fuels like ethanol and biodiesel by 2012. This would be nearly double present production levels.
Iowa is the nation's top producer of ethanol, with capacity expected to exceed 1 billion gallons by the end of the year.
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Source: Waterloo Courier
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