If you've been following the crude oil markets even casually over the last six months, you've certainly noticed the unprecedented spread between two key oil price benchmarks—West Texas Intermediate (WTI) crude at the Cushing, Oklahoma delivery point and Brent crude from the North Sea that is traded in London. These benchmark oil grades, often called "marker crudes," are the two most actively traded crude oil contracts in world. Due to its lower sulfur content and higher API gravity, WTI light, sweet crude has historically traded at a slight premium to Brent crude (that premium has averaged about $1.50/barrel since 1990). But over the last six months or so, the two benchmarks have flip-flopped and WTI crude has been priced at a deep discount to Brent crude. The discount was much as $19/barrel in February and has been running at $12-14/barrel ever since. Of course, energy market experts, financial analysts, and reporters have been having a field day examining the causes and consequences of this phenomenon (in fact, the Wall Street Journal ran this article about the waning influence of the WTI benchmark just yesterday). Analysts and economists following the issue have generally concluded that the differential between WTI and Brent is the result of three primary factors: 1) a surge in unconventional oil production in North America ("unconventional" means the dirty stuff, like Alberta tar sands and North Dakota oil shale); 2) a resulting supply glut and limited capacity at the Cushing, OK delivery point; and 3) instability along key oil shipping routes in the Middle East and North Africa, which is pressuring Brent prices. Certainly, these are plausible explanations, but one has to wonder what role ethanol is playing in all of this. After all, ethanol now constitutes 10% of the U.S. gasoline pool and represents a rapidly growing share of U.S. refinery input. In other words, the glut of North American oil creating the logjam at Cushing is in large part the result of increased ethanol production and use. Larger ethanol supplies are eating into U.S. oil demand and putting downward pressure on WTI prices. Indeed, in its May 25 edition of "This Week in Petroleum," the Energy Information Administration indicated that ethanol production has played a significant role in reducing U.S. oil consumption and import dependence over the past five years. EIA wrote, "Shifts in supply patterns, including increases in domestic biofuels production...also played an important role in moderating import dependence. U.S. ethanol net inputs grew from 230,000 bbl/d in 2005 to 779,000 bbl/d in 2010, helping to displace traditional hydrocarbon fuels and so reducing petroleum import needs." Economists at Iowa State University and the University of Wisconsin also recently looked at ethanol's impact on oil refining and the downward pressure ethanol has exerted on wholesale gasoline prices. They concluded that "...from January 2000 to December 2010, the growth in ethanol production reduced wholesale gasoline prices by $0.25 per gallon on average." Further, they found that, "Based on the data of 2010 only, the marginal impacts on gasoline prices are found to be substantially higher given the much higher ethanol production and crude oil prices. The average effect increases to $0.89/gallon..." While ethanol represents a robust 10% of the national gasoline pool today, it represents a far larger share of our supply of domestically-sourced motor fuels. U.S. field production of crude oil was just above 2 billion barrels in 2010, while ethanol production topped 315 million barrels. That means one out of every seven barrels of U.S.-produced liquid fuels was ethanol in 2010. And because one 42-gallon barrel of crude oil yields only 19.5 gallons of gasoline, our domestic oil supply yielded about 39 billion gallons of gasoline. Meanwhile, some 200 biorefineries across the country produced 13.2 billion gallons of ethanol in 2010. Thus, ethanol accounted for 25%—one out of every four gallons—of the fuel from domestic sources that was consumed by our nation's gasoline vehicles. Without question, ethanol is now a substantial component of the U.S. fuel mix, and its ability to extend oil supplies is clearly affecting world prices. And that's exactly what has OPEC oil ministers worried. In confidential 2010 U.S. Embassy cables recently uncovered by WikiLeaks, Ambassador James Smith stated that the Saudi assistant petroleum minister had expressed concern that Saudis could be "greened out" of the U.S. fuel market by biofuels like ethanol. According to the cable, "Prince Abdulaziz (the Assistant Minister of Petroleum) noted that in 2009, the U.S. for the first time consumed more ethanol domestically than Saudi oil. Saudi officials watched the ethanol debate with great interest..." You know you've officially arrived on the global fuels scene when you're making Saudi oil sheiks sweat about losing market share. And increased competition isn't something the Saudi oil juggernaut is looking for these days—they're already a bit on edge as they come to terms with the "end of easy oil" and contemplate going after the costlier, dirtier oil that lies further beneath the desert sands. (Incidentally, all of the cables unearthed by WikiLeaks from the U.S. Embassy in Riyadh are worth reading. The Saudis' concerns that their oil reserves have been overstated and their warnings about the effect of speculation on world oil prices are particularly interesting). The message underlying all of this recent news about oil markets is clear. Whether it's the surprising price spread between WTI and Brent crude, lower gasoline prices at the pump, or the frayed nerves of a Saudi oil minister, U.S. ethanol is clearly having a meaningful impact on U.S. and global oil supplies, demand, and prices.