Jul 232012

Blending ethanol brewed from corn into gasoline stocks is not bringing down fuel prices, an M.I.T. study finds

The renewable ethanol fuel blended into the United States’ gasoline supply does not lower prices at the pump as advocates have claimed, according to a study released this week by the Massachusetts Institute of Technology.

The paper critiques earlier studies sponsored by the Renewable Fuels Association (RFA), which found that mixing ethanol with transportation fuel reduced gasoline prices by 89 cents in 2010 and $1.09 in 2011.

“The RFA and Secretary of Agriculture are relying on the [papers] for policy recommendations, and once I started seeing signs and billboards all around D.C. pop up with the same numbers, it became important for me to set the record straight,” said Christopher Knittel, a professor of energy and economics at MIT and lead author of the report.

Today, ethanol made from corn makes up about 10 percent of all U.S. gasoline, up from 3 percent in 2003. Industry groups have maintained that increased ethanol production supports farmers, improves energy security, lowers greenhouse gas emissions and saves money at the pump.

But the MIT paper found that ethanol production has almost no impact on gasoline prices. According to Knittel, the RFA reports are flawed because the statistical models omitted important variables and made flawed correlations — in this case that as ethanol production increased, the ratio of gasoline to oil prices fell.

“We just took their exact statistics model, and instead of using the ratio of oil prices to gasoline prices, we plugged in variables we know ethanol can’t affect,” he said. “We found that if you use their flawed statistics model, one would find that ethanol reduced natural gas prices, increased unemployment in the U.S. and Europe, and increased the age of our children.”

Read more . . . 

via Scientific American – Julia Pyper and ClimateWire

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