Will the ethanol mandate drive up the cost of transportation fuel?
This report evaluates the consequences to the U.S. transportation fuel sector of increasing the volume of ethanol in the U.S. gasoline pool above current volumes - now approaching 10 percent of the fuel supply. Additional volumetric increases in ethanol use are mandated by federal law. As federal mandates take the U.S. gasoline pool above 10 percent ethanol blend, and ultimately to higher levels through E-85, the value of additional ethanol supplies is likely to decline dramatically. This cost can only be recovered through higher prices for E-10 and distillate, and depending on a wide range of factors, the mandated volumes could easily drive gasoline and distillate prices up by 10-25 cents/gallon over the next 2-3 years as compared to a scenario without the fuel mandates.