Methyl Tertiary-Butyl Ether (MTBE):Conditions Affecting the ...

ABSTRACT
The U.S. International Trade Commission 1 instituted investigation No. 332-404, Methyl
Tertiary-Butyl Ether (MTBE): Conditions Affecting the Domestic Industry, under section 332(g) of the
Tariff Act of 1930 (19 U.S.C. 1332(g)) on January 27, 1999, following receipt of a request from the
United States Trade Representative on December 23, 1998. Public notice of this investigation was
posted in the Office of the Secretary, U.S. International Trade Commission, Washington, DC 20436,
and published in the Federal Register (64 F.R. 5312) of February 3, 1999. A public hearing was held
on April 1, 1999, in Washington, DC.
MTBE, formerly used primarily as an octane enhancer to replace the tetraethyllead phased out
of gasoline in the late 1970s and early 1980s, is now used mainly as an oxygenate blended with
gasoline to add sufficient oxygen to meet the oxygen requirements of the Clean Air Act Amendments of
1990. MTBE is used in about 84 percent of U.S. reformulated gasoline (RFG); fuel ethanol is used in
much of the remainder.
The United States is the world’s largest producer of MTBE, producing about 3.5 times more in
1998 than Saudi Arabia, the second largest producer. U.S. MTBE production, trade, and consumption
all increased during 1994-98. After increasing during 1994, U.S. production capacity remained
constant during 1995-98; U.S. capacity utilization rose steadily during 1994-97 to 86 percent before
declining to 81 percent in 1998. The United States is both the world’s largest importer and consumer
of MTBE. Saudi Arabia, the world’s largest exporter of MTBE, was the largest source of U.S. imports
during 1994-98. The next three largest sources in terms of quantity during those years were Canada,
the United Arab Emirates, and Venezuela (by 1998 ranking).
Government policies in the United States and Saudi Arabia are considered by many to have
had a major impact on production, trade, and consumption of MTBE. For example, on the demand
side, the U.S. RFG and the California Air Resources Board Phase 2 programs are widely recognized as
the major factors influencing the increase in U.S. and global MTBE consumption. However, largely
because of the presence of MTBE in California water supplies, the Governor of California issued an
order on March 25, 1999, to phase out MTBE in that State by December 31, 2002. Additionally, the
July 1999 report of the EPA’s “Blue Ribbon Panel on Oxygenates in Gasoline” recommended reduced
use of MTBE in the United States, with efforts to curtail use to begin immediately.
On the supply side, Resolution No. 68, issued by the Council of Ministers of the Kingdom of
Saudi Arabia on November 25, 1992, implemented a 30-percent feedstock discount for domestic users
on liquefied gases, including butane (an input in MTBE production), based on their export price. The
butane discount, reportedly intended primarily to offset transportation costs incurred in exporting the
product and to peg the price of butane for all Saudi consumers at 70 percent of Saudi Aramco’s export
price, is said to be available to all companies operating in Saudi Arabia regardless of geographical
location or company ownership. The Saudi Basic Industries Corporation, a primarily state-held entity,
is the main MTBE producer in Saudi Arabia, accounting for about 97 percent of total Saudi MTBE
production capacity through three joint-venture operations. Saudi MTBE is said to be primarily
intended for export.
The information and analysis in this report are for the purpose of this report only. Nothing in
this report should be construed as indicating how the Commission would find in an investigation
conducted under other statutory authority.
1 Chairman Lynn M. Bragg did not participate in this investigation.