• Jul 27th 2010 at 7:58AM
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Refiners and blenders pocket 45 cents for every gallon of ethanol blended with gasoline. The subsidy, courtesy of the U.S. government, helps the industry stay afloat amidst the dwindling demand for gasoline and increasing costs of ethanol production. It's been argued that, without the subsidy, the ethanol industry would die a quick death. If a report from BusinessWeek turns out to be true, then the industry might soon be dealt a glancing blow.

BusinessWeek reports that the U.S. House Ways and Means Committee is considering a 20-percent reduction in ethanol subsidies, from the current 45 cents to just 36 cents per gallon of ethanol. The reduction would help cut government spending at the expense of ethanol refiners and blenders across the nation. The pressure to reduce the subsidy comes because the Committee is faced with the challenging task of extending the ethanol credit before it expires December 31. The proposal to reduce the credit is a compromise to please members of the committee who would rather see it vanish altogether.

[Source: BusinessWeek | Image: Jan Tik – C.C. License 2.0]

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    • 1 Second Ago
      • 5 Years Ago
      So the government is keeping afloat, with our tax dollars, (again) an industry that can't support itself and would otherwise die?
        • 5 Years Ago
        One of many yes.

        The Ethanol industry, the entire Green energy industry etc etc. Without gov't subsidies, these industries would not be competitive, for better or worse.

        It's so funny to read the comments here. Virtually all of them call for removing subsidies to oil companies as well, but curiously missing are the subsidies for the green energy industry.

        If we can all agree that subsidies are bad(which seems to kind of be the gist of the comments), then take them away from ALL industries, not just the ones you don't personally like(such as oil).

        If you want to get closer to a free market, then removing subsidies is a big part of it. It's not free if some industries have an advantage that others aren't able to get.
        • 5 Years Ago
        Actually it won't die because the use of the fuel, which I agree gives us negative energy for the amount put in, is also mandated to be blended into gasoline on top of the fact it is profitable to blend now even with out the 45 cents. So I agree the subsidy should be taken away. The mandate is another fight but there is absolutely no reason to subsidize and mandate.
      • 5 Years Ago
      Actually the ethanol industry is currently producing at margins of roughly 10 cent per gallon profitability while the fuel is at a $1.00 discount to gasoline. So taking away the 45 cents will not kill the industry, it will just make it slightly less profitable for the blenders or as we know them the guys who fill up the trucks before they go to the pump. Because ethanol can not be blended until right before it goes to the gas station. The industry is mature enough on its own to do with out the subsidy and the govt mandates the use of ethanol anyways. Finally it would be very hard to go back to conventional gasoline because much of the gas being produced is sub-octane...not allowed to be sold at gas stations and before it goes to the gas station ethanol is added, which is an octance booster, and the gas is now legal for sale. Very hard to go back to creating conventional gasoline after changing to sub-octane.
      • 5 Years Ago
      it would be so much more efficient if we would just pay the true cost of goods. But instead we pay a low price up front, then have the rest taken out on the back end in the form or taxes on something, then that money is processed through various channels of government while a part of it is siphoned off for administrative cost by who knows how many departments then its given back to the producer in the form of a subsidy. Corn based ethanol is a joke.
      • 5 Years Ago
      Subsidies should go away, and it really needs to start with the oil companies. They receive billions in direct and indirect aid, and on top of that sometimes do not pay the royalties (on land, etc.) and have that lack of payment forgiven.

      Ethanol has the bigger issue of mfgrs not altering their products to work with ethanol. Making it less efficient than it can be. While neither can be a complete replacement for oil, biodiesel is the better path for renewable (plant-based) fuels. But there again, the entire mfgr offerings would need to be revamped (there are no small diesels in most US lineups; refining focuses on cracking oil for gas use).
      • 5 Years Ago
      wonder how much they plan on reducing the subsidy on gasoline to match this and keep the market competitive for alternative sources?

      oh, yeah, they probably aren't. Rockefeller must be dancing in his own grave. actually, he's probably been doing that since Exxon and Mobil were allowed to merge back into Standard Oil.
      • 5 Years Ago
      Not only should ethanol subsidies go away, so should subsidies for oil, sugar and, oh yeah, foreign governments. For Pete's sake, let the market (the people) speak for itself. If people are concerned about the environment and want more efficient cars, they will buy them. If they think it's mostly overhyped hogwash, then they won't. But for crying out loud, let the people decide.

      Our government was originally set-up to be just one step above anarchy... governing as little as possible to protect rights, liberty and property. Now it's in everything, trying to sway markets and opinions for some greater utopian good. Ridiculous...
      • 5 Years Ago
      • 5 Years Ago
      This whole system is FUBAR.

      First stop protecting domestic sugar producers (and I live in Florida). Allow world pricing to set in and you will see our food industry switch from HFCS to natural sugar. Food will be better and healthier (did you see the amount of fat kinds and diabetes epidemic?)

      Second, if you want ethanol to be used as fuel then provide the resources. Screw E85, get us E100 engines such as GM and Ford already build in Brazil that can use gas or alcohol at any ratio. Build pipelines dedicated to ethanol. Force new gas stations to put in ethanol pumps (give them tax credit).

      Third, rather than give a subsidy to blend ethanol, raise the tax on gasoline 50 cents a gallon to help make ethanol more competitive to gas.

      • 5 Years Ago
      The subsidy needs to go away entirely. Industry needs to succeed on market demand, not solely because of subsidies from the government. If some producers go out of business, they didn't base their operation on a solid business plan anyway.

      If you start your business solely to scam free government money, then tough luck when the money runs out.

      Here's a though though: The government still mandates that billions of gallons of ethanol be mixed into our gas, if the government subsidy is cut and these producers go under, won't the oil companies need to make up that difference so that they can meet the blending mandate?

        • 5 Years Ago
        I'd say let the oil companies subsidize ethanol production. They're making billions of dollars in profit anyway (yes, even BP after losing a lot of oil during the oil spill fiasco).
        • 5 Years Ago
        In here the Gov is given them money per gallon and oil companies being subsidize is a conspiracy theory..The Gov does not give oil companies any money, people just feel they are taxed less then what they should be to promote particular agendas in this country to move people into efficient cars..Big F-ing difference...
        • 5 Years Ago
        >>If you start your business solely to scam free government money, then tough luck when the money runs out.

        I Second this so hard. So much business in america is propped up by unnecessary government money. I mean we need some social services (fire, police, military ect.) but this is just an example of market distortion.
        • 5 Years Ago
        Do you hold the same stance for gasoline? Cause you know it is subsidized more than any other fuel. You did know that, right?
        • 5 Years Ago
        Exactly - why is there even this discussion? They're missing the entire, obvious question - why is there a subsidy in the first place? Get rid of it. Stop subsidizing farms. The market needs to act, and we can't keep spending money on such things anyway. The government HAS no money. I don't see why no one understands that.

        We're spending money we don't have. You know what happens if you or I do that? We eventually have to file for bankruptcy and get shut down. Yet the government gets a free pass? How is that constitutional or even moral? How can an immoral government expect moral behavior from the people?

        Anyway, end the subsidies, end the involvement in picking our fuel. It's precisely because of chronically incompetent government energy involvement that we're stuck with one of the crappiest fuels - ethanol. The only reason we have it is because the corn industry was able to lobby for it. And they were only able to do that because people, for whatever reason, legitimized (in their minds) the role of government in choosing an energy source for the American people... a role that the government has no place in having.
      • 5 Years Ago
      Can they just stop using corn so we can have some decent fuel again? Maybe make some food out of the corn or something. I'd be willing to pay a premium for Gasoline, not Ethanol gasoline crap. Rant over.
      • 5 Years Ago
      My two cents...lower the subsidy for corn based ethanol, keep it at 45 cents for more viable sources of ethanol for a few more years.
        • 5 Years Ago
        Good call.

        One must also realize that automakers will still be encouraged to build the flex fuel cars and state governments will still be REQUIRED to buy them.
        • 5 Years Ago
        Yeah, I'm good with that, too. We need to continue research into cellulostic ethanol, in particular.

        It would be kind of cool to see the tariff on imported ethanol dialed back a bit, too. In particular, the poorer regions of the Caribbean could have an excellent opportunity to build an industry.
      • 5 Years Ago
      CORN in our food supply = evil and bad
      ETHANOL in our gasoline = evil and bad

      The government should just leave things alone - everything the subsidize or mandate is ruining our lives!
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