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]