(Posted Tue. May 15th, 2012)
May 15: America’s growing use of domestically produced ethanol reduced wholesale gasoline prices by an average of $1.09 per gallon in 2011, according to updated research conducted by economics professors at the University of Wisconsin and Iowa State University. The 2011 results, which are up from an average impact of $0.89 per gallon in 2010, were released today by the Center for Agricultural and Rural Development. To our nation’s corn growers, this is just further demonstration of this valuable domestic fuel.
“I hope that every time drivers pull into a gas station, they think about how worse things could be without ethanol,” said National Corn Growers Association President Garry Niemeyer. “Our farmers are completing planting what appears to be a record-breaking corn crop, and they have worked hard, in good seasons and challenging ones, to meet all needs for food, feed, fiber – and fuel. It’s gratifying to realize that our work is also helping consumers nationwide by keeping fuel prices down.”
The new analysis provides an update to a 2009 peer-reviewed paper published in Energy Policy by professors Dermot Hayes and Xiaodong Du. It also found gasoline prices have been reduced by an average of $0.29 per gallon, or 17 percent, from 2000-2011, thanks to the growing use of ethanol.
“Growth in US ethanol production has added significantly to the volume of fuel available in the US,” said Professor Hayes. “It is as if the U.S. oil refining industry had found a way to extract 10 percent more gasoline from a barrel of oil. This additional fuel supply has alleviated periodic gasoline shortages that had been caused by limited refinery capacity. It has also changed the relative prices of gasoline and diesel and allowed the United States to switch from being a net importer of gasoline to a net exporter.”
Three primary factors are responsible for ethanol’s more robust price benefit at the pump in 2011: higher oil and gasoline prices, higher ethanol inclusion, and ethanol being priced at a larger-than-normal discount to gasoline.
“While it’s hard to imagine that gas prices could be even higher than they are now, this study clearly underscores that the current pain at the pump would be far worse without ethanol,” said Bob Dinneen, President and CEO of the Renewable Fuels Association, which helped fund the research. “Because ethanol makes up 10 percent of our gasoline pool today, it significantly reduces demand for oil and puts downward pressure on gas prices. From coast to coast and border to border, ethanol is helping save consumers money. In these times of high unemployment and sky-high gas prices, ethanol is one America-made solution that is providing some respite for battered American families trying to make ends meet.”