Econometric Analysis of Motorists’ Preference for Ethanol in Motor Fuel

Date
2015-01-01
Authors
Liao, Kenneth
Pouliot, Sebastien
Pouliot, Sebastien
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Economics
Abstract

The second installment of the Renewable Fuels Standard (RFS2) requires minimum blending of ethanol and other biofuels into the motor fuel consumed in the United States. The vast majority of gasoline consumed in the United States contains no more than 10 percent ethanol. This gasoline-ethanol blend is conventionally known as E10. The maximum quantity of ethanol that can be blended into the total motor fuel pool through E10 is commonly referred to as the E10 blend wall. The quantity of ethanol mandated by the RFS2 is now reaching the point where it is set to surpass the E10 blend wall.

One solution to the blend wall is the consumption of gasoline blends that contain more than 10 percent ethanol such as E85, which contains no more than 83 and no less than 51 percent ethanol. On average, a gallon of E85 contains about 74 percent ethanol so each gallon of E85 consumed as a substitute for E10 increases aggregate ethanol consumption by about 0.64 gallons (EIA 2015). As such, ethanol consumption can exceed the blend wall if some motorists fuel with E85 instead of E10. However, E85 consumption in the United States has historically been limited, and it is not at the level needed to meet the expanded ethanol mandates.

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This is a Selected Paper prepared for presentation at the 2015 Agricultural & Applied Economics Association and Western Agricultural Economics Association Annual Meeting, San Francisco, CA, July 26-28.

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