ST. PAUL - Burgeoning demand for ethanol is to blame for rising E85 prices and those numbers are likely to keep going up along with gas prices, Attorney General Mike Hatch said Wednesday.
Hatch's report sought to address consumer complaints about climbing E85 prices and a popular perception that the cost of the corn-based fuel additive should reflect flat or falling corn prices.
Demand for ethanol has shot up since other states started using it to satisfy gasoline blending requirements, after abandoning a common additive linked to water pollution. Minnesota's 16 ethanol plants now sell more than one-third of the 550 million gallons of ethanol they produce annually to customers in California, New York and other states.
"What we see here are the laws of demand and supply," Hatch said. "You've got a limited supply and a big demand and it's chased the price up there."
Remember that Minnesota has also mandated that all gasoline sold in the state must contain a level of ethanol, something that is causing prices of all fuel sold in the state to remain higher than necessary.
This a perfect illustration of how government mucks up a matter and makes things worse for citizens.
People often talk of subsidies and government regulation as being "for the greater good." The thought process behind agriculture subsidies is that they keep food prices low. The idea behind subsidizing things like ethanol (and mandating their use) is that it will cause the substance to grow in use as an alternative to expensive gasoline. The problem, however, is that Americans would be better off paying higher prices for the things they purchase (like gasoline and the products provided by agriculture) then they are dealing with the taxes they pay for subsidies and the regulations they must comply with.
Think of it this way: When gas prices are high there are things I can do to avoid paying the high prices. I can buy a more fuel efficient vehicle. I can carpool. I can use mass transit. I can buy a bicycle. I can simply drive less. When the government subsidizes the growth of crops used to make ethanol, subsidizes its sale at our pumps and then mandates its inclusion in the fuel I do buy there is nothing I can do to avoid that. I have to pay the taxes that supply the subsidies and when I buy fuel I can't avoid paying for the inclusion of ethanol.
See what I'm getting at? High prices suck, but high taxes and burdensome government regulation sucks even more. I can avoid high prices, but I can't avoid the government. This is why it is so foolish to run to the government to "fix" everything. Their fixes are usually part of the problem, not part of the solution as the above article illustrates.