The latest report from the Energy Information Administration (EIA) concludes that ethanol will reduce U.S. petroleum demand by 130,000 barrels per day this year.

According to the EIA’s Short-Term Energy Outlook, “The slowing economy combined with high petroleum prices is expected to constrain growth in U.S. consumption of liquid fuels and other petroleum products to just 40,000 barrels per day (bbl/d) in 2008. After accounting for increased ethanol use, U.S. petroleum consumption falls by 90,000 bbl/d.”

The projected higher costs for crude oil in 2008 are likely to be passed on to all petroleum products. Retail prices for motor gasoline are expected to average $3.21 per gallon or 40 cents above the 2007 price. The monthly average gasoline price is projected to peak near $3.50 per gallon this spring. It is important to note, however, that even if the national average monthly gasoline price peaks near that level, there is a significant possibility that prices during some shorter time period, or in some region or sub-region, will cross the $4 per gallon threshold.

“America’s ethanol industry is living up to its end of the bargain by helping reduce petroleum use and moderate prices for Americans at the pump,” said Renewable Fuels Association President Bob Dinneen. “The nearly 8 billion gallons of ethanol being produced on an annual basis today is a vital component of our nation’s gasoline supply, adding volume and helping to mitigate the price increases that will occur as oil continues its meteoric rise.”