Policy: Entitlements

Ethanol industry fights to keep costly subsidy as profits soar

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Beltway Confidential,Opinion,Food and Drink,Timothy P. Carney,ExxonMobil,Entitlements,Minusextra,Subsidies,Ethanol,McDonalds

Not since the heady days after Republicans first mandated corn-alcohol into the tanks of innocent Americans have ethanol producers enjoyed such profits.

As the chart above shows, the (congressionally-required) demand for ethanol seems to be profiting not corn farmers these days, but the distillers who squeeze corn into moonshine and then sell it for burning rather than drinking. Somehow, the ethanol lobby uses its current success as an argument to protect the high levels of ethanol the government forces drivers to pump into their cars.

The AP has the story:

EPA officials say fewer gallons of ethanol are necessary because the fuel efficiency of cars improved more quickly than expected, helping lower fuel demand. The U.S. consumed about 134 billion gallons of gasoline last year, about 6 percent less than the record high of about 142 billion gallons consumed in 2007, according to the U.S. Energy Information Administration.

The EPA ... plans to reach a final decision in late June.

Frustrating for the ethanol industry is that the EPA's recommendation came just as ethanol was hitting its stride in profitability.

That's got to be frustrating. Just as you start capturing nearly 100 percent of the gain from a government policy forcing people to buy your product, the government threatens to force people to buy slightly less of your product!

The industry is lobbying hard to preserve and extend the ethanol mandate. Their biggest obstacle is that the food industry and the oil industry are sick of the mandate. I'm sure very few people shed tears for Exxon's lost profits or McDonalds' higher costs, but given ethanol's success, it's hard to see them as a needy case deserving subsidy.

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