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Ethanol glut may lift gas prices

  • Article by: MATTHEW L. WALD
  • New York Times
  • March 15, 2013 - 8:51 PM

 

– A glut of ethanol in the gasoline supply is threatening to push up prices at the pump and may have worsened the growing cost gap between regular gasoline and premium, some oil experts say.

Refiners have been trading ethanol credits furiously in an effort to meet federal environmental mandates, helping to significantly push up the cost of those credits — a jump to more than $1 from a few pennies in the last several days, and drivers are feeling the effects, experts say.

Prices for premium gasoline are now about 30.2 cents over the price of regular, according to Trilby Lundberg of the Lundberg Survey. That is up from 24.1 cents in 2010 and 18.2 cents in 2000. Any increases could affect about a third of this year’s car models, because premium fuel is required or recommended for them, according to Edmunds.com.

Experts disagree on the reasons for a widening gap between the costs of regular and premium gas. Reasons for the ethanol surplus are even more broadly in dispute. Gas companies are required under federal law to blend a certain number of gallons of ethanol into the fuel. But refiners argue that some cannot reach that requirement because they are nearing or at the blend wall, the maximum percentage of ethanol in gasoline that most gas stations can handle, 10 percent. They also note that 10 percent is the maximum recommended by auto manufacturers for most cars.

Refiners blame Congress, arguing that the ethanol quota was set at a time when gasoline demand was expected to rise steadily. Instead, demand has declined, and refiners, obligated to blend more ethanol than they can use, have resorted to buying a lot of ethanol credits, known as renewable identification numbers, or RINs, to meet the mandated levels.

On the other side of the debate are the ethanol producers, who say prices are being pushed lower because their product is cheaper than gasoline. This is true on a gallon-per-gallon basis, although ethanol provides less energy per gallon.

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