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By Robert Rapier on Jul 28, 2006 with no responses

Caught in a Lie

I have seen a lot of claims lately from the pro-ethanol contingent that the ethanol subsidy is actually a “Big Oil” subsidy. That claim is repeated in the following newly published article:

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.

So, is Brian Jennings correct? Do ethanol producers actually not benefit from the subsidy? Interestingly enough, Jennings’ previous comments on the subject tell the true story. From:

Exxon Mobil CEO calls for an end to ethanol subsidies

Exxon Mobil Corp., after posting a record $36.1 billion in profit last year from surging oil prices, said the United States should end 28 years of subsidies for a competing fuel made from corn because the subsidies benefit domestic growers.

“We’ve never been a supporter of subsidies under any conditions because they distort market signals,” chairman and Chief Executive Rex Tillerson said in a New York interview Tuesday. “What the government has done is stick a filter between the signals of the market and consumers. The fact that the subsidies exist shows it’s not a viable alternative.”

Tillerson rejected President George W. Bush’s call for increased government aid for ethanol, a form of grain alcohol that’s blended into about one-third of U.S. gasoline. Surging energy prices helped Exxon to the most profitable year ever for a U.S. company.

How do you think Brian Jennings reacted to the call for an end to the subsidy? After all, ethanol producers don’t benefit, as he stated above. Odd then that he replied:

“In the face of pornographic profits being made by oil companies and the reality of higher gas prices this year, it is outrageous for an executive for big oil to actually suggest getting rid of the tax credit for ethanol,” said Brian Jennings, executive vice president of the American Coalition for Ethanol in Sioux Falls, S.D.

Does Brian Jennings have an evil twin? Or did he get caught talking out of both sides of his mouth? He seems a bit defensive about keeping a credit that he claims doesn’t benefit his industry.

Just another reason I get so wound up over the ethanol issue. Too many on that side of the argument can’t stand open and honest debate. It is distort, lie, and misinform.