Why Ethanol Matters

By Bob Dinneen | March 05, 2012

One glance at the headlines of any newspaper in America is all that is needed to appreciate the importance of America’s evolving ethanol and renewable fuel industry. Whether it is turmoil in the Middle East, tens of millions of Americans still out of work, or skyrocketing gas prices, domestically produced renewable fuels are part of the solution.

It is just common sense that if America were to produce and rely more on homegrown renewable fuels, our dependence on imported oil from tumultuous regions of the world would be lessened. This is more than just common sense, it is a fact. Since 2005, the year the first renewable fuels standard (RFS) was enacted, America has seen imported oil fall from 60 percent to 45 percent of our demand. Not coincidentally, we have seen ethanol’s share of the market grow from just around one percent to more than 10 percent today.

It is also not coincidence that states with strong biofuel industries are faring much better than other states in the slow national economy following the recession of 2008 and 2009. America’s ethanol producers are directly responsible for employing more than 90,000 Americans. An additional 311,000 workers are employed, in part due to an expanding and evolving ethanol industry. These are jobs across all sectors of the economy—manufacturing, science, engineering, business, agriculture—and are helping hundreds of thousands of American families make ends meet. 

Harder to see, but no less important, domestic ethanol production is keeping gas prices lower than they otherwise would be. Today, ethanol is trading at a significant discount to gasoline. Therefore, a gallon of gasoline blended with ethanol will be cheaper to produce and cheaper at the pump. For instance, if ethanol were trading at an 80 cents per gallon discount to gasoline, a gallon of E10 would be 8 cents less than a conventional gallon of gasoline and a gallon of E15 would be 12 cents less. According to a study by Iowa State University and the University of Wisconsin, ethanol has helped keep gasoline prices 25 cents cheaper per gallon on average over the past decade. In 2010 alone, the study found that increased ethanol use took 89 cents off the price of gasoline had ethanol not been in the marketplace. 

Perhaps the most significant contribution being made by today’s ethanol industry is its trailblazing role for all of renewable energy. America’s ethanol industry is the largest alternative, renewable fuel in the world. It is expanding markets for all types of renewable fuels and conditioning consumers to use increasing volumes of safe, effective renewable fuels to power their lives. And, it is demonstrating that an appetite for the new ethanol technologies that are being developed today exists.

Ethanol matters because America’s energy future cannot be secured by a “Swiss cheese” energy policy alone. Drilling and fracking for unconventional sources of oil will not lead to energy independence in the long run. Oil is an important, but ultimately finite, resource. America must pursue an energy policy that recognizes the contributions of renewable fuels like ethanol today and appreciates the potential and necessity of ethanol and other renewables in the future.

Author: Bob Dinneen
President and CEO of the
Renewable Fuels Association
(202) 289-3835