Oil industry doubts ethanol's price impact

May 16, 2012 at 1:22 PM
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WASHINGTON, May 16 (UPI) -- The oil industry fired back this week at a study that contends gasoline prices in the United States would be more than $1 per gallon higher if not for ethanol.

The American Fuel and Petrochemical Manufacturers said in a written statement the conclusions coming out of the Midwest Corn Belt were flawed because they did not consider the lower energy content of ethanol, which gives motorists less bang for their buck.

"Increased amounts of ethanol in gasoline will likely lead to consumers paying even more at the pump," said AFPM President Charles Drevna, whose members are facing the prospect of government regulations that would dilute gasoline with even higher volumes of corn-based ethanol.

The ethanol industry cheered the earlier release of a study by the Center for Agriculture and Rural Development that was conducted by economists at the University of Wisconsin and Iowa State University. The report concluded the use of ethanol to extend oil supplies in 2011 had actually kept the wholesale price of gasoline $1.09 lower than it would have been had ethanol not been added.

"Because ethanol makes up 10-percent of our gasoline pool today, it significantly reduces demand for oil and puts downward pressure on gas prices," Bob Dineen, president of the Renewable Fuels Association, said in a written statement. "Ethanol is helping save consumers money."

The AFPM countered that its data showed gasoline with ethanol in it packed less of a punch than straight gasoline, which meant motorists actually had to burn more fuel to get to their destinations. The association cited an AAA report that predicted raising ethanol levels to 85 percent -- known as E85 fuel -- could cause the average price per gallon to jump nearly 60 cents.

Drevna said the glaring differences meant Washington should think twice before mandating more ethanol and allow the market to pick the winner. "If ethanol and other biofuels are such superior products, producers should join petroleum refiners in calling for an end to the Renewable Fuel Standard," he said. "The American people will benefit most from fair and open competition on a level playing field."

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