The renewable ethanol fuel blended into the United States' gasoline supply does not lower prices at the pump as advocates have claimed, according to a study released this week by the Massachusetts Institute of Technology.
The paper critiques earlier studies sponsored by the Renewable Fuels Association (RFA), which found that mixing ethanol with transportation fuel reduced gasoline prices by 89 cents in 2010 and $1.09 in 2011.
"The RFA and Secretary of Agriculture are relying on the [papers] for policy recommendations, and once I started seeing signs and billboards all around D.C. pop up with the same numbers, it became important for me to set the record straight," said Christopher Knittel, a professor of energy and economics at MIT and lead author of the report.
Today, ethanol made from corn makes up about 10 percent of all U.S. gasoline, up from 3 percent in 2003. Industry groups have maintained that increased ethanol production supports farmers, improves energy security, lowers greenhouse gas emissions and saves money at the pump.
But the MIT paper found that ethanol production has almost no impact on gasoline prices. According to Knittel, the RFA reports are flawed because the statistical models omitted important variables and made flawed correlations -- in this case that as ethanol production increased, the ratio of gasoline to oil prices fell.
"We just took their exact statistics model, and instead of using the ratio of oil prices to gasoline prices, we plugged in variables we know ethanol can't affect," he said. "We found that if you use their flawed statistics model, one would find that ethanol reduced natural gas prices, increased unemployment in the U.S. and Europe, and increased the age of our children."
Matt Hartwig, RFA's director of communications, pointed out, however, that the cost-savings were derived from the model used in a 2009 peer-reviewed study. It was accepted that introducing more ethanol expands fuels supplies, reduces the amount of imported oil and lowers the price of gas.
"It's the tone of the paper that belies more than anything perhaps a personal vendetta or grudge rather than intellectual process," Hartwig added. "It seems to be heavy on snark and light on substance."
Congress still pondering
Knittel's economic critique of ethanol comes as Congress continues to debate government policies on alternative vehicles and alternative fuels, including the renewable fuel standard ethanol blend mandate, or RFS. The updated RFS2 program requires that 36 billion gallons of renewable fuel be blended into transportation fuel by 2022.
At a House Energy and Commerce Subcommittee on Energy and Power hearing yesterday, subcommittee Chairman Ed Whitfield (R-Ky.) said that the RFS program "has worked well in several respects." But, he added, alternative energy technologies required greater congressional scrutiny in order to ensure an "all-of-the-above approach" rather than energy policies that favored one particular fuel over another.
Rep. Joe Barton (R-Texas) said that if the goal of the RFS is to reduce dependence on foreign oil imports and improve environmental quality, then natural gas and clean coal technology should be given greater consideration.
"Although clean coal and natural gas are not renewable in the classic sense, certainly they would reduce emissions. I'm puzzled," he said. He added that some studies have suggested that the low energy density of ethanol would perversely lead to greater amounts of greenhouse gas emissions.
Citing the recent record-breaking drought that has struck two-thirds of the country, Rep. Bobby Rush (D-Ill.) maintained that biofuels and the RFS are important parts of U.S. climate policy.