After more than 30 years, ethanol subsidies are gone. It’s the best thing Congress will (or won’t) do all year.
We’re just four days into a fresh year and I’m about to do something that typically happens just once or maybe twice a year.
I am going to tell you why I agree with Washington.
Sure, Capitol Hill was deserted. And it’s true what happened is the action of a do-nothing Congress. But the results are the same nonetheless.
You and I — the strangled American taxpayer — are on the hook for one fewer subsidy. And it’s a good thing.
Here’s the deal. It was not covered on the evening news and it was never the focus of the Sunday-morning talk shows, but the 45-cent subsidy Uncle Sam paid for every gallon of ethanol is gone.
It was here for 33 years… yet it died a quiet, lonely death.
We’re glad it’s gone.
The figures behind the subsidy aren’t all that nauseating, at least when you compare it to Washington’s long list of generous handouts.
The ethanol “bribe” cost you and me about $6 billion last year. In its lifetime, the fuel’s artificial life support cost us roughly $20 billion — a pittance compared to the $35 billion or so we send farmers each year.
Now that Congress quietly let the law expire — eliminating direct payments to the Big Oil refineries that blend ethanol into their gasoline — the price you pay at the pump will rise. Again, that’s a good thing.
It will cost you about 4 cents more a gallon. But that’s the price we pay to get Uncle Sam out of our way. That’s the price of a free market.
Believe me… it will pay off in the end.
Any subsidy is questionable. But one that stretches the span of a generation is pure waste… a political payback to one of the nation’s fattest lobbies.
While the payouts are gone, the ethanol boondoggle is far from over. The law that says Americans must burn 15 billion gallons of renewable fuel by 2015 is still alive and well. It’s a gimmick that ensures ethanol is here to stay — whether the free market likes it or not.
But there is a glimmer of hope in all this.
I’ve said it before… 2012 is the year natural gas will reach its tipping point. It won’t be our top fuel source for at least two more decades. But this is the year its fate turns from speculation to certainty.
The elimination of the ethanol subsidy is the first step in that journey.
For 30 years, Washington has dumped money into ethanol. The goal was to toss it a lifeline until the industry was strong enough to swim on its own.
But Congress has lost its political will. We’re broke… and a dependence on ethanol is worse than a dependence on foreign oil.
What’s worse, though, is the idea that fuel was America’s top export last year. With the ethanol subsidy in place, Washington was giving our neighbors a taxpayer-funded discount.
The bottom line to all of this is the idea that the economy’s natural forces always win… there is no exception.
Here’s some proof.
Over the past five years crude jumped by over 50%, coal is up by 23% and yet natural gas is down by 75%. And now, without the ethanol subsidy, the price we pay at the pump will rise.
One of the questions I hear all of the time is how long will the government stand in the way of natural gas. Most Americans realize natural gas is the economic fuel of choice (it’s cheap and abundant). Yet, Washington treats it like a dirty stepchild.
That era is ending. The quiet eradication of the ethanol subsidy is proof. The economic forces are too strong.
In the most recent issue of Safe Haven Investor, I told readers how to take advantage of this opportunity. So far, the timing has been perfect. The mid-cap stock I recommended was up by over 16% thanks to a big surge yesterday.
But here’s the good news. There is more to come.
Like I said yesterday, we’ve got a big announcement coming tomorrow. It will be the conduit that allows you to take advantage of the action in a way most folks will never have access to.
Again… it’s unconventional. It’s edgy. And it’s never been done before.
Editor’s Note: What’s the best way (it’s nearly foolproof) to spot an investment before it explodes in value? It’s not complicated, but you need to read the complete story.