Gasoline Prices Will Go Up This Week

January/04/2012 16:09PM
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With absolutely no fanfare, dying with a bang not a whimper, the 45 cent per gallon tax credit for ethanol producers went away this week. This will add 4.5 cents a gallon to gasoline prices if ethanol producers pass it through on the 10% blend in gasoline. Reverse income redistribution. Money going from the few of us who pay taxes to the many who don’t and can’t afford higher gasoline prices.

How can this happened without a hue and cry from the farmers and ethanol producers? Simple, the government mandates requiring more and more ethanol be blended into gasoline will still take 50% of the corn crop for ethanol production and the pass through to consumers will keep the ethanol producers whole. So, your tax dollars that went to ethanol producers for years will be like an additional 4.5 cent tax on the pump.

What should the government have done? Eliminate the mandates, of course. Ethanol is a pollutant. It is a net energy loser. By the time the corn is planted, fertilized, harvested, hauled to an ethanol producer, made into ethanol, hauled to a fuel terminal, more hydrocarbons are used than gained.

There is an outside chance for help. The The 54 cent imports goes away as well. Brazil is the leading ethanol producer and may begin importing it into the US. If it begins to drive the price of ethanol down, rest assured the tariff will be back. Basically, 10% of the gasoline sold today is ethanol.

The history of ethanol is an indication of the power Archer Daniels Midland has held on our government for 30 years. In getting subsidies, in getting ethanol as an additive to enhance octane and as a summer blend, in getting tariffs, and finally getting mandates. They have spread millions around state capitols, and in Washington to keep this going all this time.

Until the senseless mandates go away, don’t celebrate, just remember where that nickel came from on the pump prices next week.

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