Last month's expiration of ethanol subsidies from the U.S. federal government may already be driving up gas prices.

Average gas prices as of Friday were $3.39 a gallon, up three cents from a week ago and up from $3.26 a month ago, according to AAA. Fuel prices for the three weeks ended January 6 rose 12 cents to $3.36 a gallon, marking the first three-week increase since late October, Bloomberg News reported earlier this week, citing Lundberg Survey Inc. Bloomberg said prices rose almost 28 cents from a year earlier.

The culprit may be the end of thirty years of subsidies for corn-based ethanol. By failing to vote in an extension, Congress allowed the $0.45 per gallon production subsidy to expire with the start of 2012. With an annual payout of $6 billion, the subsidy was a popular target for politicians looking to show their dedication to reducing the deficit, but its expiration may have triggered a 4.5-cent increase in cost for gasoline suppliers.

Such rising fuel prices may spell further bad news for consumers already battered by record refueling costs last year. Average gas prices jumped about 27 percent last year to $3.53 a gallon, and fuel prices surpassed the $4 threshold last May. As a result, vehicle-refueling costs totaled more than $4,100 for the typical U.S. household in 2011 and likely accounted for the largest percentage of a average U.S. family's annual income since 1981, the Associated Press reported late last month.





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    • 1 Second Ago
  • 66 Comments
      carney373
      • 3 Years Ago
      According to a Merrill Lynch study published in the (anti-ethanol) Wall Street Journal, biofuels (of which ethanol is overwhelmingly the most important) prevented oil from rising 15% higher than it did in its 2007-2008 peak, saving the US (and denying OPEC) more than $100 billion. Small wonder we were subjected to a torrent of anti-ethanol FUD, with messages carefully targeted at both the right (it's subsidized! it's green!) and left (it's not green! it causes hunger!). Beyond frustrating that this enemy propaganda worked, and that THE most widely used alternative fuel was successfully attacked. For the record, ethanol does NOT cause hunger; food corn production went UP as ethanol production rose. And ethanol IS green; it burns with no smoke or soot (the causes of smog), and is supported by the American Lung Association.
      carney373
      • 3 Years Ago
      They should have compensated for the end of the subsidy by opening up the fuel market to free market competition and ending OPEC's effective monopoly control, by making full flex fuel a required standard feature in all new gasoline cars. http://www.openfuelstandard.org/2011/05/welcome.html
        lne937s
        • 1 Month Ago
        @carney373
        If they really wanted free markets, they would end the ethanol mandate that forces ethanol to be blended into gasoline. And they should end all production subsidies (only the blending subsidy was ended). And they should end the ethanol subsidy that pays the majority of the cost to install gasoline pumps that are also capable of pumping ethanol blends. Forcing people to buy new cars with E85 capability is not a free market solution.
        marcopolo
        • 1 Month Ago
        @carney373
        @carney373 Carney, I can understand your passionate support for bio-fuels, but inaccurate statements don't help your cause. Opec does not have a 'monopoly' on oil production, nor are Opec members the biggest suppliers of Oil to the US. If that's your sole argument for a bio-fuel subsidy or compensation, then it fails. A much better argument is that bio-fuel provides a secure energy source for defence purposes while preventing the spread of rural poverty and the loss of small communities in rural areas by providing a high value crop for marginal farms and local industry..
      samagon0
      • 3 Years Ago
      so wait, if it is more expensive to make something, the cost gets passed down to the consumer? I'm shocked.
        samagon0
        • 1 Month Ago
        @samagon0
        really, this is a revelation worthy of forbes, or WSJ!
      Jim Illo
      • 3 Years Ago
      I'm glad I've had to buy less than 30 gallons of gas since I bought my Volt last March.....
        Yespage
        • 3 Years Ago
        @Jim Illo
        I keep having to remind myself which side the gas tank is on when going in to refuel my Insight. Gas'ing up once a month is a real nice thing. In any case, gasoline hasn't had a need for a reason to change in price. Gasoline was nearing high levels despite oil being far from them. The joys of commodity trading.
        carney373
        • 3 Years Ago
        @Jim Illo
        I just wish GM had kept its original promise to make the Volt flex-fuel. That way you could use electricity for short range, ethanol for long range, and gasoline only as an extreme last resort.
          EZEE
          • 3 Years Ago
          @carney373
          (laughing) Now why does having the volt be flex fuel get a down vote? I have no opinion on ethanol, but really... :D
      farscape
      • 3 Years Ago
      Fine. The price of gas goes up. Let the consumer pay for the product. The Government needs to get out of the subsidize business funding their campaign donor's businesses.
        carney373
        • 3 Years Ago
        @farscape
        The problem is that oil enriches the terrorists.
          Dave D
          • 1 Month Ago
          @carney373
          You may not like Marco's comment, but it doesn't change the fact that Canada is our biggest supplier of oil.
          EZEE
          • 1 Month Ago
          @carney373
          @PR Switching back and forth is fun...between my above failed attempts to instigate, and reading of candians and maple syrup, I have tears in my eyes. The great thing is, however, if people read these, they learn of batteries, commodity issues (from you and Marco), financial constraints, etc. Beautiful thing. But especially cars that have a mass that can be reduced to, or below 500kg, as well as efficient drives that perform well in an enjoyable manner, and have a profile that causes them to ease through the air with minimal resistance. Yes, pleased with myself, and don't care if it's just me... :D
          EZEE
          • 1 Month Ago
          @carney373
          @ Carney (I think that was my point....) :)
          carney373
          • 1 Month Ago
          @carney373
          All oil sales, whether from those nice Canadians or not, enriches the terrorists by making the oil still available for sale on the world market more scarce and expensive.
          EZEE
          • 1 Month Ago
          @carney373
          Marco's comment did make me LOL (damn Canadians and their....maple syrup and....delicious beer...okay, hard to hate Canadians)... But oil is a commodity, so if we did not buy any from the middle east, our consumption would still cause the prices to rise (evil commodity speculators!) and the middle eastern types would still benefit. Only by the planet reducing consumption and the reductions outstripping supply would we see a drop and those countries get less.
          marcopolo
          • 1 Month Ago
          @carney373
          @carney373 Canadians?
          PR
          • 1 Month Ago
          @carney373
          Marco likes to switch back and forth between being a simpleton and an intellectual based upon whatever suits his political whim at the moment. He knows the oil is fungible.
      jjmcavoy.law
      • 3 Years Ago
      Are any of these complaining posters the same ones that want government out of business?
        EZEE
        • 3 Years Ago
        @jjmcavoy.law
        Did anyone really complain? I want government out of business, but I have no complaints
      EZEE
      • 3 Years Ago
      @marco and PR Great perspective....thanks!
      marcopolo
      • 3 Years Ago
      I fail to understand the concept that buying oil encourages terrorism! The main terrorist bases for Al Qaeda are in Afghanistan, but Afghanistan has no oil. Some terrorists may coincidently be citizens of oil producing nations, but many are not. It's quite wrong to label anti-US or even anti-western values as 'terrorist'. The worst and most destructive terrorists of the twentieth century were citizens of Ireland, West Germany, Italy, Japan, India and Palestine. It's true some oil rich dictators have funded 'resistance' or 'liberation' movements in the past. But when it comes to Governments, Israel, France, North Korea, and Eire, all are guilty of practising State sponsored terrorist activities. (The US supports Israeli terrorist activity ). But none of this has anything to do will oil! Canada is the the largest supplier of oil to the US, Australia is an oil producing nation, Norway, Brazil, Romania, UK, Finland, China, Mexico, Nigeria, Brunei, UAE,Russia, etc etc ...are these terrorist nations? Poverty, (or ideological fanaticism) breeds terrorism. Terrorism is the weapon of the weak and powerless against established authority. It's born from either a desperate desire for freedom from a cruel oppressor, or a delusional demand for recognition. In a few instances, terror becomes an instrument of government policy. The US has plenty of home grown terrorists (delusional) who have nothing to do with oil. Nor are terrorists restricted any religion. Buddhist, Hindu, Jew and Christian, enthusiastically form sects to slaughter each other with bombs, guns, stones etc. Racists, separatists. right-to-lifers, Anarchists, extremists from all sides of the political spectrum, jostle with a plethora of just plain delusional whack-jobs to create terrorist mayhem! But none of this terrorist activity has nothing to do with any commodity, including oil !
      Eideard
      • 3 Years Ago
      http://tinyurl.com/6q5y842 to look at more of the picture. Watch more biz news, folks.
      carney373
      • 3 Years Ago
      Even Adam Smith, the founding father of free market economics, favored sail cloth subsidies to prevent Britain from being dependent on its enemies for that era's source of strategically vital transportation motive power. Yet too many of my fellow conservatives and hawks insist on blindingly following economic non-interventionist dogma off a cliff, to a point where we pay attention only to the PRICE PRICE PRICE and not to WHERE the money goes. Gasoline is jihad juice, funding war on us.
      Spec
      • 3 Years Ago
      Well the price of oil had been rising for weeks as well and that is not yet fully reflected in the gas price. So I would not just assume it is the ethanol issue.
      mapoftazifosho
      • 3 Years Ago
      Or it's speculation on Iran being crazy...
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