Adding low-cost ethanol to the nation’s gasoline supply improves energy security and saves the average American household more than $750 per year, according to a new study conducted by energy economists from the University of California-Berkeley and leading universities in Brazil and the Czech Republic.
The analysis concluded that “adding ethanol to gasoline decreases the price paid by U.S. drivers at the pump. We estimate the average discount per gallon to be $0.77 between 2019 to 2022 and averaged across our models. …this would add up to total savings of $95.1 billion per year for U.S. consumers.”
Spread across 124 million U.S. households, this equates to an average annual savings of $767 per household. Adding ethanol to gasoline reduces demand for petroleum, which in turn puts downward pressure on prices for crude oil and refined products. In addition, ethanol is typically priced below other octane boosters and gasoline blendstocks at wholesale terminals where fuels are blended. The combination of ethanol’s lower cost and its ability to pressure oil prices by extending fuel supplies results in large savings for consumers. The authors of the new study attribute much of this benefit to the Renewable Fuel Standard, which created the investment certainty needed to rapidly expand ethanol production.
“The accessibility of renewable fuels limits the bargaining power of the largest oil producers and brings about a higher degree of fuel security to the U.S.,” the study’s authors concluded. “We estimate that blending roughly 330 million barrels of ethanol into U.S. gasoline lowers global crude oil prices as well as retail gasoline prices. The main conclusion is that the RFS program has lowered the prices of gasoline at the pump at a statistically significant level.”
Renewable Fuels Association President and CEO Geoff Cooper said the study’s results come at a critical time for U.S. policymakers. “American consumers would be paying much higher prices at the pump if not for the inclusion of more than 14 billion gallons of low-cost, low-carbon ethanol in our nation’s gasoline supply each year,” Cooper said. “This new study confirms that adding ethanol to gasoline is a proven solution for significantly reducing gas prices and providing economic relief to American families. As war in Eastern Europe continues to wreak havoc on global energy markets, and as abnormally high inflation rates continue to bedevil the U.S. economy, the Biden administration and Congress should take note of this study’s findings. And they should act immediately to allow increased use of higher ethanol blends, like E15 and E85, year-round and nationwide.”
The new study, which was commissioned by the Renewable Fuels Association, is available here.