Ethanol reduces gas prices by $0.29-$0.40 per gallon, says downloadable study

The Center for Agricultural and Rural Development said that ethanol production has reduced gasoline prices by up to $0.40 per gallon, and released their study online. The researchers found 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.”

In Washington, Iowa State University economist Bruce Babcock testified before a US Senate committee yesterday that if all ethanol subsidies were halted immediately, the price of a bushel of corn would drop 13%, but only have an effect on food prices of a few percentage points.

Meanwhile, a study from the International Food Policy Research Institute found that if ethanol production were capped at 2007 levels, corn prices would fall only 14 percent by 2015. The Chairman of the Council of Economic Advisors said that ethanol production was responsible for two to three percent of the increase in global food prices.

A change in Chinese meat consumption habits since 1995 is diverting eight billion bushels of grain per year to livestock feed and could empty global grain stocks by September 2010, according to a new study from Biofuels Digest, now available for download here in an expanded version.

The Study, “Meat vs Fuel: Grain use in the U.S. and China, 1995-2008” concluded that, even if the U.S. ethanol industry were shut down tomorrow, rising Chinese demand for meat, and the ensuing livestock feed demand, will empty global grain stocks as soon as 2013. The report offers gloomy news for policymakers who have hoped to address global food vs. fuel concerns by restraining U.S. ethanol demand.

“It’s not food, it’s not fuel, it’s China,” said Jim Lane, editor of Biofuels Digest and author of the report.

In Washington, the chief economist at the Department of Agriculture said that ethanol subsidies have had an “important impact” on corn prices, saying that retail food prices increased by 4 percent in 2007 and will increase by 4 to 23.,5 percent in 2008. Joseph Glauber added that ethanol had little to do with increasing wheat and rice prices, attributing those rises to Chinese demand, and Australian and Canadian crop failures.

The US Labor Department reported that food prices rose at an annual 4.4. percent rate in March, but gasoline and other energy costs have rises 17 percent in the past year.

Researchers from Texas A&M University have concluded that eliminating the Renewable Fuel Standard “does not result in significantly lower corn prices,” and that “The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil.”

The report said that, in addition, speculative investment in the commodities futures markets were leading to price volatility, and “the loss of the ability to use futures markets for price risk management due to the inability to finance margin requirements.” Commenting on the report, National Corn Growers Association president Ron Litterer said “The Texas A&M study dispels the food vs. fuel debate. This study shows there are many forces creating increases in food costs and ethanol is not a major factor.”

Free Subscription to the Daily Biofuels Digest e-newsletter

Related Stories

Merrill Lynch says ethanol blending reduces gas prices 45 cents per gallon

A Merrill Lynch study estimated that U.S. gas prices would be 45 cents per gallon higher without the effect of ethanol blending, confirming a similar finding from the Ethanol Promotion and Information...

Minnesota researchers find cellulosic ethanol reduces “health and environmental” costs of fuel by more than 50 percent, compared to gasoline; first-gen ethanol at break-even to worse

Researchers from the University of Minnesota will publish a study in the Proceedings of the National Academy of Sciences confirming that cellulosic ethanol emits lower amounts of fine particulate matt...

Nationwide waiver of biofuels mandate would boost gas prices by $1.10, association says

Bob Dineen, president of the Renewable Fuels Association, projected that a nationwide waiver of the Renewable Fuel Standard would result in an immediate $1.10 hike in the price of gasoline to $4.71 pe...

B10 reduces emissions, same fuel economy as diesel, Purdue study finds

A Purdue study has concluded that buses running on B10 biodiesel reduce emissions without increasing costs to consumers. The study, conducted between April 2006 and April 2007. The study recommended B...

Corn ethanol reduces greenhouse gases by 40 percent compared to gasoline, and can expand to 33 billion gallons by 2030, new studies find

The Illinois Corn Growers Association released two studies from the ProExporter Network and the University of Illinois' Chicago's Energy Resources Center, that conclude that US ethanol production has ...

Detailed results downloadable for five-year study on switchgrass production costs, feasibility

In Nebraska, detailed results from the five-year switchgrass study, that demonstrated average production costs of $60 per ton of biomass with a low of $39 per ton, are now available online. The comple...