An Iowa State University Economist has released research showing that mixing ethanol in with gas has had a significant impact on gas prices. I.S.U. economist Dermot Hayes studied ethanol’s impact on gasoline prices over a 11-years beginning in 2000. During that time, Hays says adding ethanol to gas inventories led to a 29-cent-a-gallon drop in gasoline pump prices.
“What ethanol has done is essentially allowed the refiners to extract 10% more gasoline from a barrel of crude oil, and so if they had discovered some magical tool to do that, then of course you’d expect the price of gasoline to fall,” Hayes says.
The gas price research includes the entire continental United States, and shows ethanol’s effect during the past two years is even more dramatic. Hayes says it lowered pump prices an average of $1.09 a gallon during 2011
“Oil refiners are making a much money as ever on diesel oil, but not as much on gasoline, and so that’s where some of the benefits to motorists has occurred. More competition from ethanol, and they price gasoline accordingly,” according to Hayes. Hayes says the corn-based fuel should be a welcome sight to motorists.
“People who drive gasoline-powered cars should be very happy, but of course there are people who would have otherwise purchased the corn that is used for ethanol that have reason to be unhappy,” Hayes says. “But certainly when you’re driving your car on gasoline you can be sure that it is less expensive than would otherwise have been the case.”
Hayes says adding ethanol to the nation’s fuel supply is enabling the U.S. to switch from being a net importer of gasoline to a gasoline exporter. He conducted the ethanol/gas study with a University of Wisconsin economist.