CARD report: Ethanol reduced gas prices by more than $1 in 2011

Ethanol Producer Magazine
By Holly Jessen
May 15, 2012

A Center for Agricultural and Rural Development report shows that increasing ethanol production and higher crude oil prices in 2011 had a substantial impact on wholesale gasoline prices. As a result, ethanol reduced the price of wholesale gasoline by an average of 89 cents in 2010 and $1.09 in 2011. “This impact is greatest in the regions of the country where ethanol penetration is greatest,” said one of the study’s authors, Dermot Hayes, professor of economics and of finance at Iowa State University. The price decreasing impact ranged from 73 cents per gallon in the Gulf Coast to $1.69 per gallon in the Midwest.

The new analysis is an update to a 2009 peer-reviewed paper published in Energy Policy by Hayes and Xiaodong Du, assistant professor in the Department of Agricultural and Applied Economics, University of Wisconsin-Madison. The professors found that from January 2000 to December 2011, the growth in ethanol production reduced gas prices by 29 cents per gallon on average and 45 cents per gallon in the Midwest. “Growth in U.S. ethanol production has added significantly to the volume of fuel available in the US,” Hayes said. “It is as if the U.S. oil refining industry had found a way to extract 10 percent more gasoline from a barrel of oil.”

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