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Proceed cautiously on subsidies

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Don’t say the U.S. Energy Department didn’t provide fair warning with last spring’s prediction that the nation’s fledgling ethanol industry would have trouble keeping up with demand during peak summertime usage.

Indeed, in recent days, the few-cents-a-gallon savings Iowa motorists had been accustomed to receiving on ethanol blends evaporated. In some cases, the price of the fuel was higher than regular unleaded. There’s no simple answer to why the price break disappeared, but generally it’s believed there is increasing demand for ethanol now that more states have banned the use of the environmentally harmful additive MTBE.

That’s good news for the renewable fuels industry, but it’s more of a blip than the seminal moment the free-market crowd would like advocates of subsidies, tariffs and other incentives to believe it is.

Consumers are fickle, and the fuel’s backers worry that motorists who were loyal to ethanol when they got a modest price break will abandon it if the savings disappear. That concern is well-founded in an era of unprecedented high gasoline prices. Ethanol and the rest of the biofuels industry are not ready to fly solo and survive or die on the free market.

Ethanol and other biofuels aren’t an environmental cure-all and there are nagging problems associated with their production, but generally they’re good for America. Alternative fuel production plants provide new markets for farmers, are good for the mostly rural communities where they’re located, and help improve national security because, theoretically at least, they’ll reduce America’s dependence on oil from politically unstable regions.

Elimination of subsidies and other incentives may eventually occur as part of an overhaul of farm subsidies that set artificially low prices for the crops used to produce the fuels, but when one of the loudest voices calling for an end to incentives comes from a big oil company like Exxon Mobil Corp., fresh on the heels of record $36.1 billion profit last year, it’s not only OK, but wise, for politicians to turn a deaf ear.