A study released today confirms Missouri drivers are saving money at the pump thanks to ethanol. The research results were announced at a press conference in the state capitol and concluded that drivers in Missouri are expected to save an average of 9.8¢/gal. due to the 10% ethanol standard that went into effect Jan. 1, 2008.
According to the Energy Information Administration (EIA), Missouri drivers used over 2.9 billion gallons of gasoline in 2007. With nearly a dime a gallon difference, using ethanol-blended fuels translates to statewide savings of more than $285 million dollars in 2008. The study, "Impact of Ethanol on Retail Gasoline Prices in Missouri," was performed by John Urbanchuk with the economic consulting service LECG and paid for by the Missouri Corn Merchandising Council (MCMC).
"With petroleum industry profits of $123 billion and fuel prices spiking 40% in the last four months, the pain at the pump is getting intense," says Jayne Glosemeyer, MCMC chairwoman and farmer from Marthasville, MO. "The implementation of the Missouri renewable fuel standard – blending the state's gasoline with 10% ethanol – is the one thing helping to ease the pain. It is keeping money in consumers' pockets and keeping dollars here at home."
The savings and projections in the study were estimated using 2007 gasoline price data at the rack and retail levels for Missouri published by EIA and ethanol price data published weekly by USDA. Gasoline and ethanol price projections were estimated using information published by EIA in its 2008 Annual Energy Outlook.
The study does not factor in the increasing use of biofuels like ethanol that are helping to extend gasoline supplies and hold retail pump prices down. According to Merrill Lynch commodity strategist Francisco Blanch, U.S. gas prices would be 15% higher without the increasing effect of biofuels. Without ethanol, the price at the pump would be $3.70/gal., instead of the recent average price of $3.25/gal.
"If you add the 10¢ drivers are saving from ethanol and the 45¢ from additional supply, Missouri consumers are saving 55¢/gal. That's a huge deal," stresses Glosemeyer. "It's especially huge when you consider we use 3 billion gallons of gasoline in this state every year. And all those savings are staying here in Missouri. That's money we're keeping here and not sending overseas to pay for imported oil."
With over 70% of Missouri's fuel supply containing 10% ethanol in 2007, few problems were observed when the Missouri renewable fuel standard kicked in on Jan. 1, 2008. The standard includes a consumer safety net, requiring the E10 blend only when the price of ethanol is less than regular gasoline. Missouri is one of three states to have a renewable fuel standard in place and the first to have this unique pricing mechanism.
"Consumers are still hurting at the pump, but it is nice to know ethanol is helping to ease that burden," says Glosemeyer.
A fact sheet and answers to frequently asked questions on the Missouri renewable fuel standard are posted on Missouri Corn's Web site, www.mocorn.org.