The ethanol industry is already feeling the effects of the elimination of the volumetric ethanol excise tax credit.
The price of ethanol has dropped in the last two months, said Randall Doyal, chief executive officer of Al-Corn Clean Fuels in Claremont. Blenders were selling the ethanol in their tanks to take advantage of the credit before it expired at year-end, on Saturday.
He figures the price will straighten out in time and that most ethanol plants will weather the storm. After all, they knew the end of the credit was coming so they had time to prepare.
But anytime the market is upside down like it is now, it's painful, Doyal said.
The volumetric ethanol excise tax credit, which is also known as the blender's credit, was created in 2004. The amount of the credit has been reduced from 51 cents per gallon to the current 45 cents per gallon of ethanol blended with gasoline. The credit goes to blenders and fuel marketers, not to ethanol plants.
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Jeff Broin, chief executive officer of Poet, said earlier this month that the elimination of the credit could have a slight impact on ethanol plant profitability.
It will also affect drivers, increasing prices at the pump an average of 4 cents per gallon. Ethanol lowers all prices at the pump 17 cents per gallon, saving every driver in America $100 per year, he said.
The ethanol tax credit was visionary, Broin said. It nurtured a fledgling industry to where 10 percent of the nation’s fuel supply is ethanol.
Poet operates several ethanol plants in Minnesota and Iowa.
Ethanol plants have improved efficiency since they began popping up across the countryside, Broin said. Today's plants use half the energy and 20 percent of the water the first plants required. The industry has also increased the yield of ethanol per bushel of corn by nearly 20 percent.
The ethanol industry has matured to a point where it can survive without the tax credit, Broin said.
Unlike the oil industry, which has had subsidies for 100 years, ethanol is willing to move away from its tax credit after 30 to 35 years, he said. Broin said he thinks the oil industry should give up its tax incentives and compete with ethanol on a level playing field.
