What is in this article?:
• Updated study finds that between 2000 and 2011, benefits of ethanol included reducing U.S. wholesale gasoline prices by 29 cents per gallon nationwide.
• Study authored by economists at Iowa State University's Center for Agricultural and Rural Development.
• Touted by the Renewable Fuels Association.
Several years ago, a study produced by Iowa State University’s Center for Agricultural and Rural Development found that, between 2000 and 2010, the benefits of ethanol included reducing U.S. wholesale gasoline prices by nearly 28 cents per gallon nationwide.
“That study wasn’t funded by anyone — it was done because we were academically interested in the subject,” said professor Dermot Hayes, who authored the study with then-graduate student Xiaodong Du. “We sent it to a peer-reviewed journal, Energy Policy, and it was accepted and published.”
Du, said Hayes during a May press call, “was interested in the whole crude oil market, in general, for his dissertation. He and I were trying to understand the link between corn prices and the energy value of corn. We were tracking those markets looking at historical data and had originally linked the price of corn to the price of crude oil via the relationship between gasoline and crude oil.”
The pair noticed the historical relationship between gasoline and crude oil was “breaking down. Crude oil was strong, but gas prices weren’t as strong. In particular, the price of diesel continued to track crude oil but the price of gasoline fell below its historic relationship.”
They decided to see what might explain observed patterns. “There are hundreds of issues that influence gasoline prices and the price of gasoline relative to crude oil. In our paper, we tried to control for all other forces such as hurricanes that might occur in a month and the stocks being held in the United States and elsewhere. … We took those out of the equation and what was left was the impact of ethanol on gasoline prices.