Study find ethanol helped lower gasoline prices by a $1

Mixing ethanol with gasoline helped reduce the cost of gasoline by more than a $1 in 2011, according to researchers at the University of Wisconsin-Madison and Iowa State University.

The research found ethanol helps drive down the price of gasoline by taking the place of more expensive fuel. Consumers saved on average $1.09 per gallon due to the addition of ethanol.

The new report was financially backed by the Renewable Fuel Association, an ethanol industry group, and it is an update to a similar study done in 2009 that found ethanol reduced prices by 25 cents on average.

Researchers said ethanol’s impact on gasoline prices was more pronounced in 2011 because of the growth in ethanol production and the rise of crude oil prices.

According to the report data, the average gasoline price of $3.52 for 2011 would have been closer to $4.60 per gallon without the inclusion of 13 billion gallons of ethanol.

“The ethanol industry plays a huge role in easing the pain for consumers at the pump,” says Joshua Morby, executive director of the Wisconsin Bio Industry Alliance. “This study confirms that year after year, especially in the Midwest, consumers would see historically high gas prices if cheaper, home-grown ethanol were not blended into traditional gasoline.”

But not everyone agrees on ethanol’s impact on gasoline prices.

James L. Williams, an energy economist, told The Milwaukee Journal Sentinel that the energy capacity of regular unleaded gasoline and a gallon of E-85 ethanol fuel aren’t the same.

E-85 ethanol fuel doesn’t have as many British thermal units, and consumers would have to pay about a $1 more to get the same amount of BTUs out of E-85.

“That dog don’t hunt,” Williams said. “Recent prices of ethanol and gasoline are the same on an energy content basis, providing no savings to consumers.”