Ethanol Delivers Relief at the Pump with Higher Prices

Cindy Zimmerman

The situation between the United States and Iran is having an impact on oil prices and gas at the pump, but ethanol is helping to moderate that, according to the Renewable Fuels Association (RFA).

“The current crisis in the Middle East again highlights the critical need for greater domestic energy security and diversity,” said RFA President and CEO Geoff Cooper. “Given the global nature of crude oil markets, we cannot simply frack our way to energy independence. The fastest and most effective way to insulate our nation’s consumers from geopolitically induced price shocks at the pump is to increase our use of domestically produced ethanol. To help mitigate impending pump price increases, EPA should immediately act on the President’s commitment to remove regulatory barriers to E15 expansion and fully enforce the Renewable Fuel Standard.”

RFA notes that ethanol is currently selling for 40-50 cents per gallon less than gasoline at blending terminals and a recent study shows that ethanol significantly helps dampen gasoline price shocks that result from sudden oil market disruptions. In fact, the study found that if renewable fuels were removed from the fuel supply, gas prices would be more than $1 per gallon higher.

The September gas price study, by independent economist and energy expert Dr. Philip K. Verleger, Jr., looked at oil market disruptions over nearly 50 years and provided an example in which the availability of ethanol avoids a significant impact to U.S. gasoline prices from a supply disruption.

“Retail prices would today be above $4 per gallon were renewable supplies removed from the supply mix,” Verleger writes. “The lower gasoline prices, in turn, allowed consumers to spend more on the things they wanted rather than motor fuels. … The economic benefit of lower gasoline prices that is directly attributable to the availability of renewable fuels adds one to two percentage points to the U.S. GDP every year.”

Read the study.

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