Think gasoline prices are too high? Well, they could be about 30 cents per gallon higher if it wasn't for the availability of ethanol in blended gasoline, a new study says.

As motorists took to the highways over the Memorial Day weekend, many could have been paying $2.30 to $2.40 per gallon rather than the $2-per-gallon national average if not for ethanol, according to a study released by the National Corn Growers Association

The study entitled “Ethanol and Gasoline Prices” concluded that motorists would be facing much higher gas prices if not for the contribution of ethanol to the U.S. fuel supply.

Without ethanol, consumers would likely pay an additional 30 cents per gallon for gas, according to the analysis.

“We're experiencing historically low gasoline inventories, and at the same time gasoline consumption is increasing,” said NCGA CEO Rick Tolman. “On top of that, OPEC-determined crude oil prices continue to trend upward. It all adds up to sky-high prices at the pump and consumers are beginning to wonder just how high prices will go.

“Fortunately, ethanol is helping to conserve the U.S. gasoline supply by adding more than 3 billion gallons annually to the fuels market.”

Some of the highlights of the study by economist John Urbanchuk:

  • Without ethanol, gas prices would increase 14.6 percent, or 30.2 cents per gallon in the short term (including the entire summer driving season).
  • Without ethanol, gas prices would increase 3.7 percent, or 7.6 cents per gallon, in the long term once refiners build new capacity or secure alternative sources of supply.
  • More than 30 percent of all U.S. gasoline is blended with ethanol.
  • Without ethanol, refiners would be forced to import about 217,000 barrels per day of high-octane, gasoline blending components.

Not only is ethanol helping to hold gas prices down, it is also invigorating rural economies, improving air quality and bolstering energy security, said Tolman.

“Ethanol is becoming an integral part of the energy marketplace,” he noted. “And as the industry continues to move forward, ethanol will help reduce U.S. dependency on foreign petroleum by adding significant amounts of fuel to our domestic energy supply.”

The Renewable Fuels Association projects the industry will produce more than 3.3 billion gallons of ethanol in 2004, up from 2.81 billion gallons in 2003. Currently, 78 ethanol plants have the capacity to produce more than 3.2 billion gallons annually. Ten additional plants under construction will add more than 400 million gallons of annual production capacity.

While most consumers would appreciate any reduction in gasoline prices, the recently completed study may have already been supplanted by events.

The benchmark price of crude oil delivered to the United States hit a record high of $42.22 a barrel following a terrorist attack on an oil industry compound in Saudi Arabia and concerns that increased oil production may not reduce prices.

The worsening outlook for oil prices led Canadian politicians to promise to provide more investment in alternative fuel production in campaign stops for the June 28 parliamentary elections.

Canadian Finance Minister Ralph Goodale said the ruling Liberal Party plans to quadruple both the production and consumption of ethanol in Canada over the next decade.

The “Ethanol and Gasoline Prices” analysis is available on the Internet at www.ncga.com/ethanol/pdfs/GasPriceReport.pdf.


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