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Bill USA

(6,436 posts)
Wed Sep 25, 2013, 05:03 PM Sep 2013

Economist says RFS saves drivers up to $1.50 per gallon - Biofuels Digest

http://www.biofuelsdigest.com/bdigest/2013/09/24/economist-says-rfs-saves-drivers-up-to-1-50-per-gallon/

In Colorado, economist Philip K. Verleger, Jr. says Had Congress not raised the renewable fuels requirement, commercial crude oil inventories at the end of August would have dropped to 5.2 million barrels, a level two hundred million barrels lower than at any time since 1990. He says the US renewable fuels program has cut annual consumer expenditures in 2013 between $700 billion and $2.6 trillion. This translates to consumers paying between $0.50 and $1.50 per gallon less for gasoline.



Commentary: Renewable Fuels Legislation Cuts Crude Prices(emphases my own)

http://www.pkverlegerllc.com/assets/documents/130923_Commentary1.pdf


In 2007, the US Congress passed the Energy Independence and Security Act (EISA), which amended the renewable fuels program to raise the use of ethanol and other renewables as alternatives to petroleum. These fuels have replaced a significant volume of petroleum consumed in the United States. EISA increased the required renewable fuel amount by four hundred thousand barrels per day in 2010 and 2011, five hundred thousand barrels per day in 2012, and nearly seven hundred thousand barrels per day in 2013. The total amount blended into the petroleum mix from 2008 to 2012 was seven hundred million barrels.

Had Congress not raised the renewable fuels requirement, commercial crude oil inventories at the end of August would have dropped to 5.2 million barrels, a level two hundred million barrels lower than at any time since 1990. The lower stocks would almost certainly have pushed prices higher. Crude oil today might easily sell at prices as high as or higher than in 2008. Preliminary econometric tests suggest the price at the end of August would have been $150 per barrel.

The implication for world consumers is clear. As noted in the August 2013 Petroleum Economics Monthly, the US renewable fuels program has cut annual consumer expenditures in 2013 between $700 billion and $2.6 trillion. This translates to consumers paying between $0.50 and $1.50 per gallon less for gasoline.


NOTE that this is quite consistent with the estimate by Merrill Lynch several years earlier I referred to here: http://www.democraticunderground.com/?com=view_post&forum=1127&pid=54461

NOte that we are currently making considerably more ethanol than we were in 2008 when Merrill Lynch made their estimate. This no doubt explains the range given by Verleger going above that est. price computed based on estimate of ML.



http://www.pkverlegerllc.com/about/philip-k.-verleger/

About: Philip K. Verleger

Dr. Philip K. Verleger, Jr. is president of PKVerleger LLC and a Visiting Fellow at the Peterson Institute for International Economics. Dr. Verleger’s research has focused on the study of energy commodity markets and, more recently, the amazing transformation of the US energy sector.

During his long and distinguished career, Dr. Verleger has correctly anticipated most of the major structural changes occurring in the oil industry over the last 25 years. In 1986, he was the first economist to fully comprehend and explain the appearance and development of energy commodity markets. Dr. Verleger has chronicled the evolution of these markets since then and has been a leading figure globally in driving their growth. In 2012, he was the first economist to write extensively on the United States’ emergence as an energy exporter. His latest papers have chronicled the economic implications of this unexpected tectonic shift.

Dr. Verleger earned his Ph.D. in Economics from MIT in 1971. He began his work on energy as a consultant to the Ford Foundation Energy Policy Project in 1972. He then served as a Senior Staff Economist on President Ford’s Council of Economic Advisers and Director of the Office of Energy Policy at the US Treasury in President Carter’s administration.

Dr. Verleger has been a Senior Research Scholar and Lecturer at the School of Organization and Management at Yale University and a Vice President in the Commodities Division at Drexel Burnham Lambert. He is now Owner and President of PKVerleger LLC. From 2008 to 2010, Dr. Verleger served as the David E. Mitchell/EnCana Professor of Management at the University of Calgary’s Haskayne School of Business.
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