With a Middle East crisis once again roiling global oil markets, a new report shows that American-made ethanol keeps gasoline prices down—saving drivers well over $50 billion each year, or 39 cents per gallon.
“As our nation again prepares to celebrate its freedom on July Fourth, this report demonstrates the enormous value of American-made ethanol in promoting energy independence,” said Renewable Fuels Association President and CEO Geoff Cooper. “The United States is producing record volumes of crude oil and reducing its dependence on foreign sources. Still, as recent events have shown, the global nature of petroleum markets means that disruptions occurring halfway around the world can impact fuel prices here at home. Blending low-cost ethanol into gasoline is a proven strategy for reducing fuel prices and strengthening the U.S. market’s resilience against global supply chain disruptions.”
In the report, George Hoekstra of Hoekstra Trading LLC, an expert in petroleum refinery process research and technology management, analyzed the economics of substituting ethanol for refinery-derived gasoline, considering the effects on both octane value and energy content. Ethanol is a high-octane, low-cost component of the fuel supply. The report estimates the cost of refinery-derived octane to be 4.5 times higher than that of ethanol-derived octane.
Hoekstra concludes, “The energy equivalent substitution to a level of 10 percent ethanol implies that ethanol is adding a net of 39 cents/gal worth of octane to the U.S. E10 gasoline pool. To say this another way, if ethanol was removed from the U.S. gasoline pool, replacing its current octane contribution with refinery octane would increase refining cost and the wholesale cost of gasoline by 39 cents per gallon or $54 billion/year.”
E10, a blend containing 10 percent ethanol, is the predominant form of finished gasoline sold in the United States. Hoekstra also estimated that the cost savings per gallon of finished gasoline increase as ethanol content increases. The study found that using blends like E15, which are becoming more widely available in the U.S. market, results in even larger savings.
The study, which was commissioned by RFA, did not consider the other ways in which ethanol can contribute to lower gasoline prices, notably the aggregate effect of boosting U.S. fuel supplies by approximately 1 million barrels a day.
