Governor Rell Urges President, Congress to Tackle

Twin Pressures of Energy & Food Price Spikes

Recommends Second Stimulus, Steps to Reduce Ethanol

Costs and Increase Imports So Demand for Corn is Reduced

Letter to the President and Congressional Leaders 

            Governor M. Jodi Rell today announced she is urging President Bush and Congressional leaders to temporarily waive the federal Renewable Fuel Standard and lift a 54-cents-per-gallon tariff on imported ethanol. The Governor said these two steps could reduce the pressure that families in Connecticut and across the nation are facing from endless increases in energy prices and the costs of staple foods.

            Governor Rell also called on Congress and the President to pass a second, energy-related stimulus package to help families keep up with food and energy costs.

            “Connecticut residents and business owners, squeezed from one side by energy prices and on the other by food prices, are trapped in a vise,” Governor Rell said. “The pressure is relentless and mounting ever-higher. It is time for the federal government to take some strong, definitive action to address these issues.”

            The Governor noted in her letter that a gallon of regular unleaded gasoline currently costs an average of $3.787 in Connecticut. A month ago the average was $3.35; a year ago the average was $3.06. A dozen eggs costs around $3, while a gallon of milk runs about $4. A box of Kellogg’s Corn Flakes costs $4.29 while a top round beef roast and chicken breasts are both priced at $4.99 a pound.

            “As unrelated as the cost of a gallon of gas and a gallon of milk might seem, these price increases actually have a common link: corn,” Governor Rell said. “The demand for ethanol – either as an additive to gasoline or as the primary component in fuels such as E85 – has increased sharply in recent years. Since most ethanol is made from corn, that demand has meant there is less of the crop for use as food for people and animals. Moreover, many farms are opting to switch from crops such as wheat to corn because of the higher price commanded by corn.

            “Every day the families of Connecticut – like their counterparts in every other state – face difficult decisions and diminishing choices,” the Governor said. “They are struggling to cope with the epic upward spiral of energy prices, struggling to avoid the worst effects of the current economic slump and struggling to make ends meet. Their struggles have been made all the more difficult because the prices of basic staples such as eggs, cereal, bread and milk have shot up by double digits even as more and more of our household budgets are consumed at the pump or burned to heat our homes.”

            Governor Rell recommended two specific actions to ease the demand pressure on corn prices:

• Lift the current 54 cents-per-gallon tariff on imported ethanol. “The tariff is a major disincentive to imports of ethanol,” the Governor said. “Especially since refiners have turned to ethanol in lieu of additives such as MTBE, virtually all of the ethanol used in motor fuels has been domestically produced. Importing less-expensive ethanol from producers such as Brazil, Mexico and Jamaica could reduce gasoline prices and ease domestic demand, but because of the tariff those potential savings have not been achieved.”

• Waive temporarily the federal Renewable Fuel Standard. “I recognize that ethanol is an increasingly important component of the nation’s efforts to decrease its dependence on foreign oil imports and improve air quality, and I value these efforts,” Governor Rell said. “However, given the current crisis, I believe a temporary waiver is in order and will not significantly hinder energy independence or environmental improvement programs.”

            The Governor also recommended that Congress and the President develop a second stimulus package. The current payments are intended to boost the economy by spurring consumer spending. But economists and market watchers say most families are likely to use their checks to pay off credit cards or keep up with everyday expenses.

            “More and more families could benefit from a second payment to help them bridge the widening gap between income and the costs of gasoline and groceries,” Governor Rell said. “Consumer confidence is in a steep decline – and small wonder, given how many families wonder what difficult choice they will be forced to make tomorrow. A second stimulus payment would provide families with a glimmer of hope, helping them do more than simply keep their heads above the turbulent economic waters.”