The Renewable Fuel Standard (RFS) has lowered gas prices by an average of 22 cents per gallon in recent years and saved the typical American household $250 annually, according to a study published today by economist and energy policy expert Dr. Philip K. Verleger, Jr.
The study used an econometric model to estimate the impacts of the RFS, which requires refiners to blend increasing amounts of renewable fuels with gasoline and diesel, on crude oil and gasoline prices over the last four years (2015-2018). Findings reveal that the RFS has provided substantial economic benefits to consumers in the United States and worldwide.
The Renewable Fuel Standard Program: Measuring the Impact on Crude Oil and Gasoline Prices concludes that by expanding fuel supplies by approximately 1 million barrels per day, the RFS reduced the price of crude oil by an average of $6 per barrel from 2015-2018. In turn, gas prices were reduced by an average of 22 cents per gallon, which amounts to a savings of nearly $5 every time consumers fill up. According to the study, the RFS is responsible for putting roughly $90 billion back into the pockets of U.S. consumers over the past four years, increasing discretionary income and raising the nation’s gross domestic product.
The report also found that if ethanol was entirely eliminated from the fuel supply, as some opponents of renewable fuels have advocated, gasoline prices would surge by more than $1 per gallon. According to the study, “Retail prices would today be above $4 per gallon, not $2.90, were renewable supplies removed from the supply mix.”
“If you’ve never heard of the Renewable Fuel Standard before today, this study tells you all you need to know: blending renewable fuels like ethanol into our gasoline supply saves American consumers money every time they fill up their tank,” said Geoff Cooper, President and CEO of the Renewable Fuels Association (RFA). “As we head into the summer driving season, it’s important for American consumers to recognize that the RFS is keeping prices down at the pump, while at the same time reducing harmful tailpipe pollutants, cutting greenhouse gas emissions, and moving us closer to energy independence.”
Dr. Verleger’s analysis corroborates the findings of earlier studies by economists at Iowa State University, the University of Wisconsin, Louisiana State University, U.S. Department of Energy, Merrill Lynch, and other institutions.
With over forty years’ experience studying and writing about energy markets, Dr. Philip K. Verleger holds a PhD from MIT and has consulted multiple administrations– as Senior Staff Economist on President Ford’s Council of Economic Advisers and, later, as the Director of the Office of Energy Policy at the US Treasury during the Carter administration. Since then, his career in academia and energy consulting has continued to make him a trusted subject expert on the function and structure of energy commodity markets.
You can read more about Dr. Verleger and access the full report here.
The study released was funded by the Renewable Fuels Foundation.