Fuel Prices Forecasted to Rise Following Ethanol Tax Credit Expiration

DES MOINES, Iowa --A single gallon of gasoline will rise approximately four cents after Jan. 1, when the ethanol blending tax credit expires, ethanol producer Poet's CEO Jeff Broin forecasted this week. Additionally, Broin predicted that E85, a blended fuel made with 85 percent ethanol, will see an increase of around 40 cents per gallon, the Des Moines Register reported.

Currently, fuel blenders receive a 45-cent-per-gallon tax credit for mixing ethanol with gasoline. The end of this decades-old credit doesn't spell doom for the ethanol industry, Broin stated, noting the ethanol industry is now mature and can weather the loss.

"We can't afford to go backward on the Renewable Fuel Standard," said Broin. The provision mandates the use of more than 13 billion gallons of renewable fuels in 2012. However, "ethanol still has to go through our competitors in the oil industry," he added.

The future of ethanol use in Iowa -- currently the highest producer of ethanol in the United States -- may be helped along by a recently announced joint venture between the Iowa Renewable Fuels Association (IRFA) and the Petroleum Marketers and Convenience Stores of Iowa (PMCI). The two groups, which remain independent from one another, plan to focus on bringing more renewable fuels to the state.

"We want to work together with the convenience store organization on consumer education and how to get more E15 into the market," said IRFA Managing Director Lucy Norton. While the groups have differed on issues such as the expansion of ethanol's legal blend limit and the proposed mandated use of ethanol use in Iowa gas stations, they have a mutual interest in planning the reconfiguration of Iowa fuel pumps in order to accommodate higher ethanol blends, the Register report stated.

"Working collectively, we can bolster the distribution network for domestically-produced fuels and strengthen the local economy," said Dawn Carlson, president of PMCI.