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Study: Ethanol Reduces Gasoline Prices

posted on May 18, 2012

Study: Ethanol Reduces Gasoline Prices

The research, conducted by economists at the University of  Wisconsinand Iowa State updates a 2009 peer-reviewed paper published in the journal Energy Policy.

According to the study, ethanol consumption reduced wholesale gasoline prices by $1.09 per gallon nationally in 2011.  And from January of 2000 to December 2011, growth in ethanol production reduced wholesale gasoline prices by an average of $0.29 per gallon. 

The research also examined the economic impact at the retail level and concluded that ethanol reduced the average American household’s spending on gasoline by more than $1,200 last year.    

According to the study: “The surge in ethanol production in recent years has essentially added 10% to the volume of fuel available for gasoline powered cars and in so doing it has allowed the U.S. to switch from being a major importer of finished gasoline to a major exporter of both gasoline and ethanol.”

Despite favorable research, ethanol is not without critics.  The Coordinating Research Council -- a non-profit organization funded by oil companies and automobile interests - released a study of its own this week. 

According to its analysis, 25 percent of autos operating on gasoline blends containing 15 percent ethanol, commonly known as E15, failed with mechanical damage in 100,000 mile tests. 

While EPA has already approved E15 for 2001 and newer cars and light duty trucks, American Petroleum Institute officials said the CRC test results confirm that EPA moved too quickly in its E15 vetting process.  According to API President and CEO Jack Gerard, “EPA’s decisions in 2010 and 2011 approving E15 ethanol-gasoline blends for most American vehicles were premature and irresponsible."  

The Department of Energy -- which conducted the testing on behalf of EPA -- reiterated the methodology and validity of its research and characterized the CRC study as "significantly flawed."  Adding, “We believe the choice of test engines, test cycle, limited fuel selection, and failure criteria of the CRC program resulted in unreliable and incomplete data, which severely limits the utility of the study.”

Ethanol interests also blasted the study saying, "All this latest hit piece proves is that ethanol’s opponents are becoming more desperate to keep ethanol – which could help consumers save more at the pump – completely out of the marketplace.”



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