Home Energy Economist’s Analysis Shows RFS Cutting Crude Oil, Gasoline Prices

Economist’s Analysis Shows RFS Cutting Crude Oil, Gasoline Prices


New analysis from energy economist Philip K. Verleger shows consumers are saving fifty-cents to a-dollar-fifty per gallon on gasoline because of increased ethanol production under the Renewable Fuel Standard. Verleger says the implication for world consumers is clear – the U.S. renewable fuels program has cut annual consumer expenditures in 2013 between 700-billion and 2.6-trillion dollars. According to Verleger’s commentary – the RFS has added the equivalent of Ecuador’s crude oil output to the world market at a time of extreme tightness. He says crude oil prices would be between 15 and 40 dollars per barrel higher without the substantial volumes of ethanol that have been added to petroleum inventories since enactment of the RFS. Verleger continues that commercial crude oil inventories at the end of August would have dropped to 5.2-million barrels – a level two-hundred-million barrels lower than at any time since 1990 – had Congress not raised the renewable fuels requirement.


He adds the lower stocks would almost certainly have pushed prices higher. In fact – Verleger says crude oil today might easily sell at prices as high as or higher than in 2008. He says preliminary econometric tests suggest the price at the end of August would have been 150-dollars per barrel. The full commentary from Verleger is available at www dot pkverlegerllc dot com (www.pkverlegerllc.com).