Michael Giberson
The Global Subsidies Institute takes note of a report on the consumer (and taxpayer) costs of ethanol-blended fuel in Missouri:
A report from a Missouri-based research organization debunks the claim that Missourians are saving money through a state law requiring that retail gasoline contain a minimum of 10% ethanol. The report is in reaction to an assertion by the Missouri Corn Merchandising Association (MCMA), alleging that Missourians will save more than US$ 285 million through the E-10 mandate in 2008, and nearly US$ 2 billion over the following decade.
The MCMA arrived at these numbers by taking the price difference between pure-grade gasoline and E-10 blended fuel, and multiplying it by Missouri’s projected annual consumption.
However, the report by the Show Me Institute reveals two fundamental flaws with this calculation. One is that it fails to take into account the fact that E-10 blended fuel is cheaper because ethanol producers receive tax credits and other subsidies.
“Government officials cannot simply take tax dollars from the public, give those tax dollars to ethanol blenders, and then have ethanol supporters tell the public that ethanol is saving them money with cheaper fuel as though the subsidy never existed,” write the report’s authors, Justin P. Hauke and David Stokes.
The MCMA also does not take into account that E-10 blended fuel is about 2.5% less efficient than pure-grade gasoline, meaning that Missourians will be filling their tanks more often.
When both of these factors are taken into account, the ethanol blending mandates are shown to be costing Missourians about US$ 118 million per year.
The report, “The Economic Impact of the Missouri E-10 Ethanol Mandate“, is available from the Missouri-based Show Me Institute.
(HT to Robert Rapier, R-Squared Energy Blog)