Ethanol subsidies won´t lower gas prices, consumer group reports

July 28 -- Increased federal and state subsidies for ethanol production will not benefit consumers in the form of lower gas prices, according to a study by a nonpartisan consumer tax group.

Taxpayers subsidize the ethanol industry to the tune of $2 billion per year through an ethanol tax credit of 51 cents per gallon and government corn-crop payments, the National Taxpayers Union report said. The report criticized the industry for not being able to compete in the marketplace despite "nearly 30 years of government help and protection," said Jeff Dircksen, NTU policy analyst and author of the study.

Long-term, continued corn overproduction could drop the price of corn, forcing taxpayers to subsidize farmers further. A drop in oil prices would make ethanol less competitive. The NTU estimates every dollar of ethanol profit costs taxpayers $30.

"Despite federal and state subsidies, a guaranteed market that is protected from international competitors and millions of dollars from private investors, it is abundantly clear that ethanol is not and may never be a truly competitive energy alternative," Dircksen said.

But the ethanol industry lashed out at the report, calling it misleading and cautioned consumers not to take it at face value.

"The only thing abundantly clear is that NTU´s study is nothing more than a deceptive piece of propaganda with no basis in reality," said Brian Jennings, executive vice president of the American Coalition for Ethanol.

The report incorrectly points out that ethanol producers benefit from the 51-cent Blender´s Tax Credit when it is actually an incentive the petroleum industry receives for blending ethanol into gasoline, Jennings said.

"The NTU attacks American-made ethanol from all sides, but they do not point to any alternatives, nor to they point to the extravagant incentives that the petroleum industry has received for decades," he said.