Why you’re paying more for gas than you should

One item this article misses is that IL is a double gas tax state. IL doubles the motor fuel tax to fund programs other than roads.
– Allen


By Joe Cahill of Crains Chicago Business

If you pay more at the gas pump this summer, thank an ethanol lobbyist.

By all rights, gasoline prices should decline in coming months. Crude oil supplies are up and demand is down. Yet gasoline futures prices keep rising.

What gives? The answer, at least in part, is a federal mandate requiring refineries to mix ever-increasing amounts of ethanol with petroleum to make gasoline. In 2013, this mandate is expected to reach 13.8 billion gallons, up from 13.2 billion last year.

The mandate exists because of the politically powerful ethanol industry, which stretches from Illinois cornfields through executive suites at giant corporations like Decatur-based Archer Daniels Midland Co. to the corridors of Capitol Hill. Its lobbyists convinced Congress and the Bush administration about a decade ago that subsidizing an alternative fuel would help assure energy independence and reduce pollution. Ethanol makers needed the mandate because their product can’t compete profitably in energy markets where prices are based on the cost of a barrel of oil, which is cheaper to produce than ethanol.

By requiring refiners to buy ethanol, the mandate buttresses an industry that would struggle to survive on its own. The requirement also boosts food prices by raising demand for corn.