Friday, June 17

What do you know about ethanol?

At its best, politics can help us solve problems and correct course to better practices.

Unfortunately, most of the time politics involves politicians making deals with supporters, in which the pol agrees to vote for bills designed to enrich one group of supporters in exchange for contributions and votes from the favored group(s).

So it's been with ethanol. For those who haven't been paying attention, ethanol is called a "renewable fuel," and thus is beloved by greenies--who hate oil, gas and gas-powered cars.

Unfortunately, ethanol isn't the Great Magic Solution that its supporters claim. For one thing, in the U.S. most ethanol is made from corn. With congresscreeps having used subsidies and mandates to warp the market in favor of ethanol use, companies that make it have been buying millions of bushels of corn as raw material.

Take a guess what that's done to corn prices.

Next, ethanol contains just two-thirds as much energy as a gallon of gasoline, so to compare cost per mile you need to multiply ethanol's cost per gallon by 1.5. Needless to say, this doesn't occur to the average consumer.

But the really nasty trick pulled by congresscreeps was to grant a magic "tax credit" of 45 cents per gallon for ethanol use--and then pass a law ordering gasoline makers to add 11 Billion gallons of the stuff to gasoline.

That single trick cost the U.S. treasury--eventually that's you and me--$5.4 Billion last year.

As the TV ads say, "But wait! There's more!" Yes, congress wasn't finished: The 45 cent per gallon subsidy wasn't enough; to keep U.S. ethanol prices as high as possible, they also slapped a 54 cent per gallon tariff on any ethanol imports.

Pretty cute, huh?

But finally the senate passed an amendment that would kill the tax credit for ethanol use--though they haven't changed the requirement that gasoline be blended with 11 billion gallons of the stuff per year.

Also the tariff on imported ethanol will remain in effect, allowing U.S. producers to charge 54 cents more per gallon than they otherwise would (other things being equal).

Of course this amendment still has to pass more votes to become law, but at least someone in D.C. finally woke up.

Maybe.

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