Ethanol’s Role in Gas Prices

Cindy Zimmerman

RFA The media has been sounding the alarm about higher gas prices today, following the release of the Energy Information Administration’s latest forecast. What’s interesting is that the report shifts the blame for the rising prices from ethanol to the oil industry, which the Renewable Fuels Association was quick to point out in a press release.

EIA Administrator Guy Caruso said consumers can expect gasoline prices to be 25 cents higher on average this summer. Caruso attributed 19 cents of that increase (or 76%) to high world oil price and said that the increased use of ethanol would affect gasoline prices by “just a few pennies.”
“Today’s report from EIA is a much more accurate reflection of what is going on in the gasoline and ethanol markets as refiners voluntarily eliminate MTBE from the nation’s gasoline supply,” said Renewable Fuels Association President Bob Dinneen. “Were it not for the tremendous growth of the U.S. ethanol industry and the availability of ethanol, refiners’ decisions to eliminate MTBE this spring would send gas prices through the roof.”

RFA also sent out a Fact Sheet about ethanol and gas prices that seems to have been heard by the media, as most articles have either not mentioned ethanol at all or just briefly in reference to the MTBE transition. AAA blamed it all on the government, according to CNN Money, quoting spokesman Geoff Sundstrom. “The refining industry has had to go on a crash course conversion to ethanol, and of course it’s coming at the worst possible time,” he said. “It seems the whole process could have been managed better by the federal government.”