RFA Says Ethanol Production Saves Up to $1.50 Per Gallon at the Pump
September 25, 2013 3:17 PM
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Verleger said that oil prices would be $15 to $40 a barrel higher than they are today without ethanol added in
A new analysis shows that American consumers are saving anywhere from millions to even trillions of dollars annually at the pump thanks to
According to the Renewable Fuels Association (RFA) -- which presented information from former Ford and Carter administration energy advisor Philip Verleger -- American consumers are paying between 50 cents and $1.50 per gallon less for gasoline due to the addition of ethanol blends (such as
, which is 15 percent ethanol and 85 percent gasoline).
further said that consumers are saving from $700 billion to about $2.6 trillion annually on gas because of ethanol.
Verleger said that oil prices would be $15 to $40 a barrel higher than they are today without ethanol added in.
“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,” said Verleger. “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.”
AAA said the national average is about $3.50 a gallon and the cost per barrel is around $100-$110.
E15 in particular has been a hot topic this year. In August, the U.S. Environmental Protection Agency (EPA)
froze a planned bump in ethanol levels
that was set for next year. The freeze came after state efforts to ban E15, and House debates on whether to cut the blending requirements entirely.
In 2012, only 4.55 billion bushels of corn was used to produce ethanol, which was down from 5 billion bushels in 2011. About 13.33 billion gallons of ethanol was produced last year, missing the goal of 15.2 billion gallons.
Ethanol opponents say the use of ethanol blends takes away from the nation's corn crops, and livestock farmers saw the cost of feed inflated by having to compete with ethanol. In addition, environmentalists say corn ethanol produces more emissions over its life cycle than oil.
Furthermore, ethanol can damage many old vehicles (and even some new) on American's roads because parts in the engines made of rubber, plastic, metal, and other materials aren't made for high ethanol blends.
Later in August of this year, big oil firms filed a request to cut the ethanol target for 2014. The EPA announced that refiners must blend in 18.15 billion gallons during 2014 under The
Energy Independence and Security Act of 2007
's (EISA) Renewable Fuel Standard (RFS) terms. The oil industry, however, wants that target to be slashed 3.35 billion gallons to a total of 14.8 billion gallons.
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.50¢- $1.50 Really???
9/25/2013 6:02:33 PM
I find it interesting that they say this is how much we are saving.
When I fill up at stations that have E-10 and E-0 the E-0 is usually only 10¢ to 20¢ extra.
RE: .50¢- $1.50 Really???
9/25/2013 7:47:07 PM
I think they're talking about what the price difference would be after taking into account supply and demand.
I don't pretend to know the oil and ethanol economies, but in theory the absence of ethanol would require an increased demand for oil to offset the ethanol, which would drive up the price.
These are sure to be highly speculative, since when prices increase, some sources will choose to increase production rate, which would somewhat keep prices in check.
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