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On January 1, the 45-cent per gallon federal tax credit for ethanol expired. Since then, gasoline prices have gone up in some places by more than 20 cents per gallon, leading to some speculation that there’s a connection.

Case in point, this brief item from a St. Louis TV station specifically mentions the lapsed ethanol subsidy, along with a more vague reference higher wholesale prices.

But as a USA Today piece from a few days ago pointed out, because most gasoline is (at most) 10 percent ethanol, the expiring subsidy should, in theory, only account for an increase of 4.5 cents per gallon at most.

John Funk of the Cleveland Plain Dealer says the bulk of the increase is most likely because of anticipated sanctions against Iran. And analysts say if Iran follows through on its threat to close the Strait of Hormuz, oil prices could shoot up by 50 percent almost immediately.

So did ending the ethanol subsidy cause gasoline prices to go up? Perhaps a bit. But gasoline prices are determined by a complex web of economic factors, and it looks like they’re probably going to keep going higher.

Photo by Nathan Schock via Creative Commons

Ken Paulman

Ken is the director of the Energy News Network at Fresh Energy and is a founding editor of both Midwest Energy News and Southeast Energy News. Prior to joining Fresh Energy, he was the managing editor for online news at Minnesota Public Radio. He started his journalism career in 2002 as a copy editor for the Duluth News Tribune before spending five years at the Spokesman-Review in Spokane, Washington, where he worked as a copy editor, online producer, features editor and night city editor. A Nebraska native, Ken has a bachelor's degree from the University of Nebraska-Lincoln and a master's degree from the University of Oregon. He is a member of the Society of Professional Journalists and Investigative Reporters and Editors.

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