Ethanol saves you more than $1 per gallon

Research results were released this week showing that America’s growing use of domestically-produced ethanol reduced wholesale gasoline prices by an average of $1.09 per gallon in 2011.
The updated research was conducted by economics professors at the University of Wisconsin and Iowa State University.  The 2011 results, which are up from an average impact of $0.89 per gallon in 2010, were released today by the Center for Agricultural and Rural Development (CARD). The new analysis, an update to a 2009 peer-reviewed paper published in Energy Policy by professors Dermot Hayes and Xiaodong Du,  also found gasoline prices have been reduced by an average of $0.29 per gallon, or 17%, from 2000-2011 thanks to  the growing use of ethanol.

Three primary factors are responsible for ethanol’s more robust price benefit at the pump in 2011: 

• Higher oil and gasoline prices
• Higher ethanol inclusion
• Ethanol being priced at a larger-than-normal discount to gasoline

In a release from the Renewable Fuels Association, Bob Dinneen, President and CEO said, “While it’s hard to imagine that gas prices could be even higher than they are now, this study clearly underscores that the current pain at the pump would be far worse without ethanol.”

Dinneen continued, “Because ethanol makes up 10% of our gasoline pool today, it significantly reduces demand for oil and puts downward pressure on gas prices. From coast to coast and border to border, ethanol is helping save consumers money.  In these times of high unemployment and sky-high gas prices, ethanol is one America-made solution that is providing some respite for battered American families trying to make ends meet.”

Key conclusions derived from the report include:

• In 2011, ethanol reduced wholesale gasoline prices by an average of $1.09 per gallon.
• Regular grade gasoline prices averaged $3.52 per gallon in 2011, but would have been closer to $4.60 per gallon without the inclusion of more than 13 billion gallons of lower-priced ethanol.
• The average American household consumed 1,124 gallons of gasoline in 2011, meaning ethanol reduced average household spending at the pump by more than $1,200.
• Since 2000, ethanol has kept gasoline prices an average of $0.29 per gallon cheaper than they otherwise would have been.
• Based on the $0.29-per-gallon average annual savings, ethanol has helped save American drivers and the economy more than $477 billion in gasoline expenditures since 2000 – an average of $39.8 billion a year.

What’s even more exciting about the upcoming year is that you should see even more savings per gallon with the approval of E15. Stay tuned!

Read more about the above research here.