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Update to Study Improves Ethanol’s Gas Price Impact


If Indiana Republican Senate candidate Richard Mourdock doesn’t believe ethanol blended in gasoline has an 89 cents per gallon positive impact for motorists, as was debated before the May primary, he probably won’t believe the updated report released Tuesday. The addendum to the 2009 report from the Center for Agricultural and Rural Development (CARD) on the impact of ethanol on domestic gasoline prices says in 2011 ethanol reduced wholesale gasoline prices by $1.09 per gallon nationally.

“Because ethanol is displacing ten percent of the nation’s liquid transportation fuels today, it’s sold coast to coast and border to border, it’s having a huge impact on the price of crude oil,” said Renewable Fuels Association President and CEO Bob Dinneen. “And those combined effects add up to $1.09 a gallon.”

Co-author of the report, Iowa State University Professor Dermot Hayes explains ethanol has effectively increased refining capacity in the U.S. and that is a key way it impacts overall prices.

“We used to have big spikes in gasoline prices when the refining industry approached capacity, and those spikes would dominate the effect. We haven’t seen big spikes in gasoline prices due to refining capacity because we found a new way to produce essentially gasoline and we’ve added ten percent to our refining capacity.”

So based on Hayes numbers, what kind of dollars does that save the average household? RFA’s Dinneen says, “You’re saving $1,200 a year as a consequence of ethanol being added to gasoline. Since 2000 ethanol has helped save $39.8 billion annually in excess gasoline costs, so roughly $340 per household per year. Those are startling numbers.”

Since the study is based on just 10% ethanol in the nation’s gasoline supply, Dinneen says increasing the blend to 15 percent ethanol can only result in more savings. He thinks the economics of ethanol will help drive E15 into the marketplace this summer.

According to the update, regular grade gasoline prices averaged $3.52 per gallon in 2011, but would have been closer to $4.60 per gallon without the inclusion of more than 13 billion gallons of lower-priced ethanol. The overall impact is regionalized with a range from $0.73 per gallon in the Gulf Coast to $1.69 per gallon in the Midwest.[audio:https://www.hoosieragtoday.com//wp-content/uploads//2012/05/Ethanol-study-update.mp3|titles=Ethanol study update]