Good-bye, ethanol subsidies

Congress failed to renew subsidies for ethanol production, and along with it, the 54-cent-per-gallon tariff on imported ethanol. Farm Futures says the tariff may not be an issue since Brazil buys a lot of U.S. ethanol to burn in its cars. Brazil’s vehicles are predominantly flex-fuel.

The article explains how the subsidy worked:

What many consumers don’t realize is that the tax credit didn’t go to ethanol plants, it went directly to oil companies as they splash blended ethanol into the truck to head for the local gas station. As the tax credit expires, fuel providers will raise their prices to cover, and consumers may be surprised. It doesn’t mean less ethanol will be used, since the biofuel is a mandated oxygenate in many states – at the 10% level.

The article says “Corn growers have supported the end of the credit as a way to help reduce the federal deficit, but as one corn group notes the oil companies ‘didn’t follow suit and offer up their own century-old petroleum subsidies as a budget-saving measure.’”

The article suggests there will be 5¢ increase in the cost of gasoline Monday.