Agricultural News

Increased Ethanol Usage Would Reduce Gas Prices, According to Consumer Federation of America Study (5-6-05)

Motorists could be saving as much as 8 cents per gallon on the price of gasoline at the pump if oil refiners would blend more ethanol into their gasoline supplies, according to a study released Thursday by the Consumer Federation of America (CFA).

The recent decline in ethanol prices, coupled with surging pump prices for gasoline, have created a market dynamic in which increased ethanol use could help curtail record high gas prices, according to the new CFA study, “Over a Barrel: Why Aren’t Oil Companies Using Ethanol to Lower Gasoline Prices?”

“Consumers in many parts of the country where ethanol can be delivered to existing storage and terminal facilities are not receiving lower cost supplies and are paying as much as 8 cents a gallon more at the pump than they would if oil refiners purchased ethanol to blend,” the CFA analysis says.

National Corn Growers Association (NCGA) President Leon Corzine said the study highlights ethanol’s ability to moderate gasoline prices and extend domestic supplies. “It’s a matter of basic economics,” he said. “Blending high-priced gasoline with modestly-priced ethanol results in a more affordable final product. By using ethanol, oil refiners have a real opportunity to pass along real savings to consumers during this period of high gasoline prices.”

The average price for regular unleaded gasoline was $2.24 per gallon on Monday, an increase of 42 cents per gallon since the same week last year. According to media reports, some analysts say regular gasoline could hit $2.50 per gallon by Memorial Day. The CFA study cites several reasons for the dramatic increase in gasoline prices, including tight crude oil inventories, inadequate oil refinery capacity, lack of competition and the oil industry’s increasing market power.

In contrast to gasoline prices, ethanol prices have fallen during the past six months. As an example, the price of ethanol on the Chicago spot market hit $1.82 per gallon in November 2004, but averaged $1.18 per gallon last week.

“So why don’t oil companies use more ethanol to keep (gasoline) price increases down?” the study’s author, Mark Cooper, asks. “The answer is simple. The market is not competitive enough to force them to worry about price increases. They also don’t own the ethanol. They prefer to process more crude oil and make more money by keeping the price up.” The report also states that the infrastructure necessary to expand ethanol usage already exists in many areas of the country but is not being used.

In addition to ethanol’s ability to reduce prices at the pump, Corzine pointed out the biofuel’s environmental and economic benefits. “Ethanol is biodegradable, non-toxic and significantly reduces harmful tailpipe emissions that contribute to air pollution,” he said. “Ethanol is a win for everyone in every community. It’s a win for the U.S. economy and it’s a win for our national security. Consumers should be demanding ethanol.”

To read the CFA report, click here.

"Increased Ethanol Usage Would Reduce Gas Prices, According to Consumer Federation of America Study (5-6-05)"
National Corn Growers Association --News of the Day
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