For use in local newspapers the week of June 11, 2012:
Even though gas prices are continuing to stay about $3.00 per gallon, they’re still 30 cents down or more from where they could be, according to a study from Iowa State University.
The study from ISU showed between 2010 and 2011, ethanol reduced wholesale gasoline prices by 29 cents. According to American Farm Bureau Crop Economist Todd Davis, with the last year the savings have been even higher.
“They tried to determine what the value of ethanol is to consumers,” Davis said. “They found that last year ethanol reduced the cost of gasoline by $1.09 a gallon, which was a record because the last 12 years that average has been 29 cents per gallon.”
Davis said the big savings comes simply from an increase in supply of gas.
“The average oil price was 95 dollars per barrel and that was up from $80 a barrel,” Davis said. “Ethanol is blended in with gasoline at a rate of about 10 percent. What that does is makes more gasoline available. It’s almost like you’re able to get 10 percent more oil or gas out of a barrel of oil, increasing the supply of gas available. It makes the cost of gasoline cheaper to consumers and ethanol production has been increasing each year, so ethanol itself is a little bit cheaper.”
The impact of this price difference could be huge as it means consumer spending on other goods, Davis said, especially at a time when the economic recovery is so fragile.
“When you think about how much gas you buy throughout the year, the average American family saves about $340 a year,” Davis said.
Some criticism of ethanol has been that the money being saved in gas is had at the expense of increased food prices. Davis said that simply isn’t true.
“The corn that’s used to make ethanol is not consumed by humans, it’s an animal feed,” he said. “When you make ethanol, you get the ethanol and you get the dried distillers grains, which is used to feed livestock. “