Thursday, January 19, 2012

Higher Gas Prices: Ethanol Subsidy Expiration Could be to Blame

The expiration of ethanol subsidies from the federal government last month may already be driving up gas prices at the pump, according to AutoblogGreen.

Earlier this week, Bloomberg reported an increase of 12 cents to $3.36 a gallon to filling station prices – the first three-week increase in gas prices since October.

Autoblog says that the rise could perhaps be blamed on Congress. The legislature failed last year to add an extension to subsidies of corn-based ethanol that had been in place for 30 years, allowing the $0.45 per gallon of production payout to expire on December 31, the web site reports.

Most gasoline sold in the U.S. contains at least 10 percent ethanol so the subsidy’s expiration may have triggered a 4.5 cents per gallon increase in fuel costs to gasoline suppliers. That charge that now looks to be getting passed on to consumers, the blog suggests.

The subsidy, which was the subject of legal wrangling for much of last year, paid out around $6 billion in 2011.

[Source]

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