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Alternative fuels – Difference Engine: Competition at the pump

Posted on August 16, 2012

YOU would be forgiven for thinking a stake had been driven through the heart of the ethanol lobby in Washington, DC.

Publishes by The Economist

The contentious tax credit it used to get, which put $6 billion a year of taxpayers’ money into the pockets of wealthy agri-business concerns, expired on January 1st with barely a whimper. Faced with demands for an end to the subsidy from critics on both the left and the right of the political divide, bio-refiners who use maize as their feedstock seemed simply to have accepted their fate. In fact, nothing could be further from the truth.

The reality is that, despite this summer’s scorching temperatures and record drought, America’s maize farmers are doing just fine. Their corn is currently selling for around $8 a bushel—four times its price in 2005, and up over 30% since June. The handouts had become virtually irrelevant anyway, thanks to a mandatory requirement that demands an increasing amount of corn-based ethanol be used to dilute petrol sold at the pump.

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