Ethanol Helping Alleviate Gas Prices

New report says that consumers would likely pay an additional 30 cents per gallon for gas if it weren't for ethanol. Compiled by staff

Published on: Jun 2, 2004

As millions of U.S. motorists took to the highways over Memorial Day weekend, the National Corn Growers Association (NCGA) reminded travelers that ethanol is helping to moderate record gasoline prices.

A recent scientific analysis, "Ethanol and Gasoline Prices" by economist John Urbanchuk, concluded that motorists would be facing much higher gas prices if not for the contribution of ethanol to the U.S. fuel supply. Without ethanol, consumers would likely pay an additional 30 cents per gallon for gas, according to the analysis.

"We’re experiencing historically low gasoline inventories, and at the same time gasoline consumption is increasing," says NCGA CEO Rick Tolman. "On top of that, OPEC-determined crude oil prices continue to trend upward. It all adds up to sky-high prices at the pump and consumers are beginning to wonder just how high prices will go. Fortunately, ethanol is helping to conserve the U.S. gasoline supply by adding more than 3 billion gallons annually to the fuels market."

Some of the highlights from Urbanchuk’s report are:

• Without ethanol, gas prices would increase 14.6%, or 30.2 cents per gallon in the short term (including the entire summer driving season).

• Without ethanol, gas prices would increase 3.7%, or 7.6 cents per gallon, in the long term once refiners build new capacity or secure alternative sources of supply.

• More than 30% of all U.S. gasoline is blended with ethanol.

• Without ethanol, refiners would be forced to import about 217,000 barrels per day of high-octane, gasoline blending components.

Tolman says ethanol not only is helping to hold gas prices down, but it also invigorates rural economies, improves air quality and bolsters energy security. "Ethanol is becoming an integral part of the energy marketplace," Tolman says. "And as the industry continues to move forward, ethanol will help reduce U.S. dependency on foreign petroleum by adding significant amounts of fuel to our domestic energy supply."

According to the Renewable Fuels Association, the ethanol industry is expected to produce more than 3.3 billion gallons in 2004, up from 2.81 billion gallons in 2003. Currently, 78 ethanol plants have the capacity to produce more than 3.2 billion gallons annually. Ten additional plants under construction will add more than 400 million gallons of annual production capacity.

The "Ethanol and Gasoline Prices" analysis is available online. (This link requires your computer to have Adobe Acrobat Reader. For a free download, visit www.adobe.com.)