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Energy and Agriculture Secretaries say “biofuels are already moderating gas prices”

June 12, 2008

US Energy Secretary Samuel Bodman and Agriculture Secretary Ed Schafer said in a joint letter to the chairman of the Senate Energy and Natural Resources Committee, Jeff Bingaman of New Mexico, “It is clear … that biofuels are already moderating gas prices. That impact is likely to grow substantially as more biofuels come to market.” The agencies projected that gasoline prices would have risen at least another 20-35 cents per gallon if ethanol were not available in the market.

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 per gallon. “It would kill consumers,” John Urbanchuk, the director of industry analysis group LECG, told Reuters. “It would add a bit over $1.10 a gallon to gasoline in the short term because you’ve got to go out and replace that 4.5 billion gallons of ethanol.”

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 Council last summer.

AAA reports that the average price for gasoline in the US topped $4 a gallon for the first time, reaching $4.005. More pain at the pump is expected after oil jumped $11 a barrel on Friday on weakening of the US dollar and increase in Middle Eastern tensions. OPEC said that it did not expect to increase production to ease prices. Gas prices at the pump at up from $3.10 one year ago, or 29 percent.

AAA is also reporting the effective cost per mile of E85 is 8 percent higher than the cost per mile for gasoline. Though E85 sells for 18 percent less than gasoline, AA is factoring a 32 percent loss of mileage into its estimates.

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    Written by Jim Lane · Filed Under Research 

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