Ethanol and the Economy

CornCorn ethanol production was subsidized $7 billion in 2006. That was about $1.45 per gallon of ethanol. Since it sold for around $0.38 more than the equivalent amount of gasoline, where did the other $1.07 go? To the farmers, ethanol producers and distributors, of course. ADM got drunk on it. ADM made a ton of money on it, for no good reason other than their ability to get Congress to create such a lucrative Ethanol subsidy in the first place back in 2003.

Corn is already, by far, the most subsidized grain in America. Yet Congress’ mandate to increase ethanol production (from corn, specifically) to 8 billion gallons by 2012 is showing nothing but ugly unintended consequences:

  • It is costing us taxpayers plenty because of the ever-increasing subsidy;
  • It is chewing up 20% of the available corn crop, causing demand to outstrip supply and increasing prices across the board for animal feed stocks, sweeteners and virtually everything else made from corn which we, as consumers, are paying for.
  • It is doing virtually nothing to reduce the cost of gasoline
  • It has done virtually nothing to reduce our dependency on foreign oil.

I am an advocate of ethanol production. However, I am not at all in favor of paying for it twice, which is what is happening.

Once again, Congress has provided a handout which has quickly become an entitlement. They will struggle to turn off that money spigot, even when it’s open far too wide to ever rationally justify.

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