A new report, The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry (pdf), by Xiaodong Du and Dermot J. Hayes at the Iowa State University concludes that ethanol production lowers retail gasoline prices up to 40 cents per gallon.The study found:
- This analysis suggests that the growth in ethanol production has caused retail gasoline prices to be $0.29 to $0.40 per gallon lower than would otherwise have been the case.
- The analysis shows that the negative impact of ethanol on gasoline prices varies considerably across regions.
- The Midwest region has the biggest impact, at $0.39/gallon, while the Rocky Mountain region had the smallest impact, at $0.17/gallon.
- The results also indicate that ethanol production has significantly reduced the profit margin of the oil refinery industry.
With oil prices rising, consumer will face more pain at the pump in the coming weeks. Increased ethanol production increases the fuel supply and helps to lower fuel prices.
Source: Center for Agriculture and Rural Development, Iowa State University
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