News stories and social media posts about the affordability crisis are everywhere these days. A recent Google search for the term returned 2.5 million results, and concern over the cost of living is at the forefront of both political debate and “watercooler talk” for everyday Americans.
There are two places where out-of-pocket costs are most visible to Americans: the grocery store and the gas pump. For the latter, developments have been positive. Gasoline prices heading into Thanksgiving are about the same as they were a year ago, and prices have been relatively stable in recent months—unlike episodes in the past where drivers have experienced extreme volatility at the pump.
Source: U.S. Energy Information Administration
And while it might not always be visible at the gas pump, ethanol lowers fuel prices every time we fill up. This occurs in a few different ways.
An important economic benefit that was highlighted in a recent study by refining expert George Hoekstra is that ethanol reduces the cost of octane, a key quality attribute of gasoline. The octane level of gasoline is reflected in the numbers we see on pump labels, generally ranging from 87 for regular unleaded gasoline to 91+ for premium gasoline.
The Hoekstra study estimated that American drivers save $0.39 per gallon—or well over $50 billion each year—because ethanol is used throughout the gasoline pool, substituting for more expensive (and dirtier) refinery-produced octane.
A second way ethanol saves consumers money is by extending the fuel supply and thereby holding down the cost of crude oil and refined gasoline blendstock. A 2019 study by energy economist Dr. Philip K. Verleger, Jr. found that the use of ethanol toward the federal Renewable Fuel Standard lowered gasoline prices by an average of $0.22 per gallon and that the presence of ethanol in the fuel supply significantly moderates the price impact of market disruptions, such as those from geopolitical events. A 2023 study led by Dr. David Zilberman of the University of California-Berkeley concluded the price savings could be even larger.
Finally, ethanol is typically cheaper than gasoline blendstock on a per-gallon basis in the wholesale market. And gasoline blended with 15% ethanol (E15) is even less expensive at retail than E10, the blend that constitutes the vast majority of gasoline sold in the U.S. According to E15prices.com, the national average price of E15 is currently $0.27 per gallon, or 9%, below E10. This is consistent with the results of a 2023 analysis of E15 prices. For a recent look at E15 prices across the Midwest, click here.
So, while the roadways will be busy—AAA forecasts that a record number of Americans will travel over Thanksgiving, 90% of them by car—ethanol is making the drive a little easier on our wallets. Pack your patience and have a wonderful holiday.
