07-31-07 by dugan
Last year during the big spring price spike for gasoline, a prominent excuse offered by the oil industry was the high price of ethanol, which is blended with gasoline for clean-air reasons. It’s not a great excuse, since ethanol at maximum is 10% of the clean-air formula, but there was a short period when ethanol spiked to a dollar above California’s gasoline blendstock. The price gap varied nationally.
Now the fun part. This spring, we got an even higher gasoline price spike: $3.48 a gallon in California and $3.22 nationally–even though the price of crude oil during spring averaged about $5 a barrel lower than last year. Ethanol was even lower: as much as 90 cents a gallon below gasoline in California, the biggest consumer of ethanol additive.
At those prices, ethanol would be cheaper than gasoline even without its federal subsidy and even accounting for the lower energy content of ethanol.
Here’s a chart from the California Energy Commission, showing how ethanol’s price has dropped far below that of wholesale gasoline and another clean-air additive, alkylate. Yet the plunge in wholesale ethanol prices (which takes into account a continuing federal subsidy), went only to boost oil industry profits instead of moderating prices at the pump.
Taxpayers foot the bill for the subsidy, so it wasn’t just drivers lining oil refiners’ pockets.
There’s no end to Big Oil’s excuses for gasoline price spikes and its resulting record refining profits. But this spring it wasn’t crude oil–and it wasn’t ethanol, either.