Ethanol Promotes Energy Independence

The ethanol industry is powering energy dominance.

 

In 2020, the U.S. remained a significant net importer of crude oil. Over 40% of the oil processed by U.S. refineries came from foreign sources, and has accounted for a steadily increasing share of the supply to refineries in California, the largest gasoline-consuming state.

 

The use of ethanol in the U.S. fuel supply reduced crude oil imports by nearly 500 million barrels in 2020. Ethanol is a secure fuel source compared to the Middle East and is essential for energy security.

 

 

 
Transferring American Wealth to OPEC

Even though U.S. oil production has increased in recent years, our nation’s economy still transfers billions of dollars every year to the OPEC cartel.

 

Historic Oil Import Displacement By Ethanol (Bar Graph)

 U.S. Spending On Crude Oil Imports (Chart)

 

The Hidden Cost of Oil

An “oil import premium” exists, although it is not reflected in gasoline prices paid by consumers at the pump.

These hidden costs are comprised of:

Oil-related defense expenditures, including the cost of maintaining the Strategic Petroleum Reserve. The U.S. Department of Transportation and U.S. Environmental Protection Agency estimate the additional cost of protecting the supply and transit of foreign crude oil is in the range of $5-$22/barrel.1

 

Macroeconomic effects of oil supply disruptions and price shocks. Geopolitical tensions, conflict in the Middle East, strategic production shifts on the part of OPEC, and natural disasters can cause oil supply shocks that affect GDP. Higher oil prices push up nominal consumption expenditures by increasing the price of fuel and general inflation; require a higher investment in domestic oil exploration and development; and negatively affect international trade.2

 

Higher U.S. petroleum product prices due to upward pressure on world oil prices driven by the U.S. market power (“monopsony”) in world petroleum consumption. 

 

Subsidies and Tax Incentives. The U.S. Energy Information Agency reports that subsidies and support for the U.S. crude oil industry in FY2016 totaled $18.8 billion, a massive 63 percent increase from FY2010.3 

 
Supporting Documents/Articles

1  Valuation of Energy Security for the United States (2017) and Externalities of Transportation Fuels: Assessing Trade-offs Between Petroleum and Alternatives (2013).

2  Oil Supply Shocks, US Gross Domestic Product, and the Oil Security Premium (2017)

3  Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2016 (2018)