Government decides that paying more for gas during a recession is good for consumers
With inflation under control, for now, the government decided yesterday that it was OK to provide more support to a worthless industry, ethanol. The Environmental Protection Agency quietly raised the amount of ethanol that it requires to be blended into U.S. gasoline next year from 7.76% to 10.21%. Most automakers claim that adding more than 10% ethanol to gasoline risks damaging the engines of conventional vehicles.
The price of gasoline is falling rapidly, it slid $0.0645 in New York yesterday to $1.175/gallon, yet ethanol futures are currently trading at $1.697/gallon. This means that ethanol is currently trading at more than a $0.50/gallon premium to regular gasoline. The government, in its infinite wisdom, has decided to force consumers to pay more than they normally would have to for gas at a time when the economy is in the tank. It looks like the ethanol lobbyists have been earning their money. Don't expect anything to change with the new administration either, ethanol has been one of Obama's major supporters.
EPA Raises Ethanol Blend To About 10%, Posing Challenges