BIO-DIESEL

Think About It
You have probably seen our good buddy Willie Nelson advertising his Texas bio-diesel on television. It is a blend of petroleum based diesel with plant based bio-fuel. But, as Commentator Paul Harvey says: Do you want the “rest of the story”? To me, not surprisingly, it demonstrates the fallacies of believing that worldwide free trade is a win-win for everyone.
The European Union in 2004 was complaining to the World Trade Organization that the US was subsidizing our manufacturers to allow them to compete unfavorably with European manufacturers on our exports to Europe. The WTO agreed and allowed the European Union to impose a 5% import tax on all our exports to them, and increase it 1% per month until we were in compliance. Senators Charles Grassley, (R-IA) and Max Baucus (D-MT) passed the “Jumpstart our Business Strength” (JOBS) Act which repealed the tax subsidy regime and replaced it with a bill that met WTO demands.
Here is a quote from Grassley at the time of passage. “This bill is a good solution. It’s not only the first step toward ending the Euro tax on America’s exports, but it also gives a real shot in the arm to US factories and farmers, at home and abroad. This bill was years in the making. Today’s vote was overdue, but couldn’t have been more welcome. Every day of delay means more sanctions freezing US businesses out of the European markets, and more jobs in danger. I hope the House will soon follow suit with similar legislation. We need to give permanent relief to the nation’s job creators and lift the sanctions burden from our exports.”
Hidden within the Jobs Act, Grassley inserted a “Blender’s Credit” to encourage the production of bio-fuel, which would benefit his corn-farming folks back home. At that time, I suppose, no one suspected what we were going to do to the price of cornbread, grits and cereal. The Act awards a US income tax credit of $1 per gallon on any finished bio-diesel mixture produced, but it does not have to be domestically produced. And here is the kicker. The definition is a mixture containing at least 0.1 per cent (by volume) of petroleum diesel fuel. For example, a mixture of 999 gallons of bio-fuel and 1 gallon of diesel is a bio-diesel mixture.
According to the Christian Science Monitor, a shipload of 9,000,000 gallons of Malaysian bio-fuel, typically made from their palm oil, pulls into a dock in Houston, where a shot of 9,000 gallons of petroleum diesel is blended in. The US importer now qualifies for a US tax credit of $9,000,000. He is also free to export his 9,000,000 gallons for sale to Europe, where European consumer tax credits allow him to sell above US prices. We are now supplying 20% of their bio-diesel. But, here come the Europeans again, complaining to the WTO once more about US unfair trade practices. So, you and I are helping petroleum producers with subsidies on both sides of the pond, while we have to import 80% of our fuel. Is this a great country, or what?
Fortunately, the splash-and-dash scheme has not caught on fully. Estimates are that it cost us a total of only $30 million in 2006. Then the first 4 months of 2007 saw shipments of 60 million gallons, or $60 million. According to the Wall Street Journal of April 1, 2008, it now may be costing as much as $300 million annually. You know what they say: “A million dollars here, a million dollars there, after awhile, it adds up.” But, thank goodness, our ever alert Congress has it on its radar screen. According to an anonymous member of the House Ways and Means Committee, “It’s one of the issues that’s driving closer scrutiny.