Gasoline Prices Lower Thanks To Ethanol

Gasoline Prices Lower Thanks To Ethanol

on October 23 | in Ag News | by | with No Comments

From Bioproducts Update

Ed. Note: While this is an opinion expressed about US gasoline market conditions, similar market pressures exist in Canada’s market place.

Consumers are saving 50 cents to $1.50 per gallon on gasoline as a result of increased ethanol production under the renewable fuel standard (RFS), according to a new analysis by renowned energy economist Philip K. Verleger, who served as an advisor on energy issues to both the Ford and Carter administrations.

“The implication for world consumers is clear. [T]he US renewable fuels program has cut annual consumer expenditures in 2013 between $700 billion and $2.6 trillion,” writes Verleger in a short commentary available on

“This translates to consumers paying between $0.50 and $1.50 per gallon less for gasoline.” The commentary summarizes a more detailed analysis that was included in Verleger’s August Petroleum Economics Monthly newsletter.

Crude oil prices would be between $15-$40 per barrel higher today without the substantial volumes of ethanol that have been added to petroleum inventories since enactment of the RFS. According to the commentary, the RFS today has added ” the equivalent of Ecuador’s crude oil output to the world market at a time of extreme tightness.”

“Had Congress not raised the renewable fuels requirement, commercial crude oil inventories at the end of August would have dropped to 5.2 million barrels, a level two hundred million barrels lower than at any time since 1990,” Verleger writes. “The lower stocks would almost certainly have pushed prices higher. Crude oil today might easily sell at prices as high as or higher than in 2008. Preliminary econometric tests suggest the price at the end of August would have been $150 per barrel.”

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