Bet You Thought Ethanol in Gasoline Didn’t Add to the Pump Price

March/16/2013 9:26AM
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When the government announced they would no longer subsidize ethanol, and ended the import tax embargo, most Americans thought that was the end of taxpayers paying ethanol manufacturers to make ethanol price competitive with gasoline. True, but  government  never stops using regulation to get into your wallet.

In 2007, George W Bush, Republican in name only, sat down with the Greenies, and initiated the ethanol mandate. Ethanol must be in all gasoline with escalating percentages and required purchases by refiners through 2022. This year the purchase number is 13.8 billion gallons of ethanol. This is like a Jimmy Carter regulation. Sticking a number out there every year until 2022 without knowing how much gasoline will be consumed or ethanol manufactured. This is even more Jimmy-like. They dreamed up a thing called a Renewble Identification Number, or RIN. I lived through Jimmy’s Allocation period where the government tried to account for ever gallon of gasoline in America and then allocated that gallon to a retailer based on history, etc. That resulted in skyrocketing gasoline prices and shortages. Friends of politicians who never sold a gallon of gasoline nor owned a retail outlet had allocated gallons and sold them to legitimate retailers who had growth needs. That cost got put on the pump price.

We’re back there folks. Because in 2007 the government overerestimated the gasoline demand numbers for 2013, the ethanol requirement for 2013 means refiners must put in more than 10% to meet the number. When more than 10% is  put in, bad things happen to cars. Warranties are negated. So, refiners must purchase RIN credits from someone who has used more ethanol than required. RIN prices are now one dollar up from seven cents at the beginning of 2013. But, a refiner can avoid paying this price for a RIN by exporting the gasoline, thus reducing the need to buy ethanol since the rest of the world is not on this stupid mission to drive up corn prices and gasoline prices for no good reason. Either way gasoline prices at the pump go up.

When you watch that local news reporter out there at a retail gasoline  station asking why prices are so high, just remember it’s almost always somewhat attributed to government. From not drilling here, from not allowing new refineries, from not building a pipeline to bring down cheap Canadian crude to Gulf Coast refineries(it’s being shipped by rail), to special required blends, from higher taxes, to ethanol mandates, the hand of governments are always deep in your pockets at the pump.

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