Friday, June 1, 2007

Ethanol Working to Lower Gas Prices

What's often lost in the Ethanol vs. No Ethanol debate is what would happen if we really had no ethanol available! Billions and billions of gallons of fuel would have been missed from the US fuel supply line. And as we know from Economics 101, when demand is high and supply is low (or in this case lower), then prices must increase. So ask yourself, "Is Ethanol helping or hurting my fuel costs?" (hint: the answer is helping)

Here's a timely message from the Nebraska Corn Board regarding this issue:

Ethanol working to lower gas prices
Since 2000, ethanol has met 30 percent of the increase in gasoline demand, helping to increase fuel supplies and lower prices for consumers.

LINCOLN, NE – Even though gas prices have broken record after record this year, motorists should know that the state’s corn and ethanol producers are working hard to lower the cost at the pump.

“As ethanol production increased over the last six months—with new plants coming online—ethanol prices have fallen, meaning ethanol blends at the pump are priced lower than regular gas,” said Jon Holzfaster of Paxton, farmer-chairman of the Nebraska Corn Board.

During his presentation to the Advancing Renewable Energy conference last fall, Keith Collins, the U.S. Department of Agriculture’s chief economist, said that in 2006, ethanol made up approximately 3.6% of the gasoline demand—a six-fold increase since 1996. There’s another way to look at it, though.

In the 1996-2006 time frame, gasoline demand increased by 20 billion gallons, while ethanol production rose 4 billion gallons. “That 4 billion gallon increase met 20 percent of the increase in gasoline use over the decade,” Collins said. “Since 2000, ethanol has met more than 30 percent of the increase in gasoline demand. So I ask you to imagine, if 30 percent of the marginal gasoline demand over the past five years did not come from biofuels, what might crude oil refining margins and gasoline imports look like?

Holzfaster said gas prices would certainly be higher if ethanol wasn’t available.

“The simple fact is, without ethanol, we’d need another 6 billion gallons of gasoline this year. I can’t imagine how high prices would be if we had to import that much more gas,” he said. “Oil refiners can’t add capacity fast enough to meet demand—but ethanol producers have had many new plants come on line already this year, and more are on the way. Ethanol is helping keep gas prices down by increasing the fuel supply.”

In fact, the rack price of ethanol in Nebraska was $2.46 per gallon last week, a dollar or more below the cost of regular unleaded. “That’s why gas blended with ethanol, to make E-10 or gas with 10 percent ethanol, costs less than regular unleaded,” Holzfaster said. “It’s also why E85, or gas with 85 percent ethanol, costs even less for those that have flex fuel vehicles. Using an ethanol blend can save drivers money at the pump.”

Randy Klein, director of market development for the Nebraska Corn Board, said there are enough ethanol plants under construction or expanding today to more than double the amount of ethanol produced—in Nebraska and nationally—and corn producers will be there, ready to supply them.

“As these plants come online over the next few months, gas blended with ethanol should continue to be priced below regular gasoline. But no matter what the price is, the addition of 8 to 10 billion gallons of ethanol into the fuel supply helps buffer high gas prices,” Klein said.

The Nebraska Corn Board collects and disburses the funds generated by the 1/4 of a cent per bushel corn checkoff. Nebraska corn checkoff funds are invested in programs of market development, research and education.

Source: Nebraska Corn Board balanced food and fuel
ethanol food versus fuel energy security

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