Analysis shows ethanol cuts gas prices by up to $1.50 per gallon

An analysis released Monday credits the Renewable Fuel Standard (RFS) and increased ethanol production for saving consumers as much as $1.50 per gallon on gasoline.

Analysis shows ethanol cuts gas prices by up to $1.50 per gallonIn his commentary, Energy economist Philip K. Verleger says the renewable fuels program has reduced annual consumer expenditures in 2013 by somewhere between $700 billion and $2.6 trillion. Based on that estimate, he says the RFS saves consumers between $0.50 and $1.50 per gallon.

Verleger's analysis shows crude oil prices are between $15 and $40 per barrel lower than they would be without the RFS. Price estimates are based on oil demand in addition to the energy created by the increased ethanol production.

According to Verleger, "Had Congress not raised the renewable fuels requirement, commercial crude oil inventories at the end of August would have dropped to 5.2 million barrels, a level two hundred million barrels lower than at any time since 1990."

Some tests show last month"s crude oil prices could have sold for $150 per barrel without the program.

Read Verleger's commentary.


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