Gas Subsidy Ends Could Cause Fuel Prices To Rise
Tim Esterdahl | Jan 25, 2012 | Comments 5
Fuel efficiency and the cost of filling up the tank in E85 vehicles has been a topic of discussion for a while now and it seems that it may get more expensive to drive them. There’s a chance that price of gas is going to be higher at the pump due to the U.S. government ending the 30-year subsidies they have on ethanol.
This sign may not be that far off with current gas subsidies coming to an end.
The credit ended on January 1, 2012 and estimates currently assume that regular unleaded gasoline will increase by approximately 4.5 cents per gallon. The government currently experiences pays $6 billion each year for the credit which is the reasoning for ending the subsidy. The large federal deficit has contributed significantly to the decision and members of Congress have been under pressure to make cuts wherever possible to decrease it.
The increase in the price of ethanol isn’t the only factor that contributes to a higher gasoline price. The changing oil market also directly affects the price of gasoline and much quicker than the change in ethanol pricing will. AAA reported that gas prices recently averaged at $3.28 across the nation, which is up 21 cents from its price of $3.07 at the same time last year.
A big unknown is still the impact by another move by Congress which is to drop the 54-cents-per-gallon tariff on ethanol imports.
It’s worth noting that E85 vehicles, which run on 85% ethanol and 15% gasoline, experience lower prices due to the subsidies and may experience a larger hit to the pocket than those who drive vehicles that run on regular unleaded fuel.
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Filed Under: Auto News
Here in Georgia, ethanol is only about 15-20 cents cheaper a gallon…not enough to make up for the increase in fuel consumption (actually costs more to run). E10 was nice while it lasted when it was cheaper, but I would rather have a 100% gasoline formulation for better mileage with the higher fuel prices. Just my 2 cents.
Gas companies/owners and govt. are one in the same. Both out to make huge profits and destroy America. No way should gas prices be over 3 bucks per gallon ever. Billions and billions in profits and yet they price gouge the average consumer so they can line their pockets.
Brian J – Good point that ethanol is less fuel efficient – that definitely impacts the points made here.
mk – I understand how you feel.
To make matters worse, the demand for gasoline has been steadily dropping in the US, as it currently sits at a 13-year low. When consumers were quick to use the fossil fuel, refiners had little to worry about as the costs of blending were covered by the hefty demand. But now that people seem to be avoiding the pump at all costs, refiners are having to push prices higher to keep profits in line. The final piece of the puzzle is what big oil companies are calling the “10% blend wall,” and it could have the biggest impact of all.
More than 100% agreed with Tim Esterdahl’s which he made in this topic.
Thanks.