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Fact
Sheet: Gas Prices and Oil Consumption Would Increase Without Biofuels
Secretary
of Energy Samuel W. Bodman and Secretary of Agriculture Edward T. Schafer sent a
letter
on June 11, 2008 to Senator Jeff Bingaman addressing a number of questions
related to
biofuels,
food, and gasoline and diesel prices. The letter is available at http://www.energy.gov
Without
Biofuels, Gas Prices Would Increase $.20 to $.35 per Gallon.
The
U.S. Department of Energy (DOE) estimates that gasoline prices would be between
20
cents
to 35 cents per gallon higher without ethanol1, a first-generation biofuel.
For
a typical household, that means saving about $150 to $300 per year.
For
the
U.S.
overall, this saves gas expenditures of $28 billion to $49 billion based on
annual
gasoline
consumption of roughly 140 billion gallons.
Ethanol
use has exceeded the requirements of the Renewable Fuel Standard (RFS),
established
in
the Energy Policy Act of 2005, demonstrating that refiners and gasoline
marketers have an
economic
advantage to use more ethanol than is required by law.
Biofuels
are Reducing
America
’s Dependence on Oil.
Without
biofuels, DOE estimates that the
United States
would have to use 7.2 billion more
gallons
of gasoline in 2008 in order to maintain current levels of travel (a 5 percent
increase).
This
increased demand for gasoline would drive up the price Americans pay at the pump
due to
basic
supply and demand.
Gasoline
Consumption Reduction
Attributed
to Ethanol Use
Gasoline
Displacement 2007 2008
(estimated)
Thousand
Barrels / Day 357 472
Billion
Gallons / Year 5.5 7.2
Biofuels
are Reducing Greenhouse Gas Emissions.
DOE
scientists found that corn ethanol from the
U.S.
reduced greenhouse gas emission 19
percent
compared with gasoline, when the full “life cycle” of the fuel is considered
– from
growing
it to producing the fuel and burning it.
DOE
scientists estimate that 13 million tons of greenhouse gases were avoided in
2007 due to
biofuels
production and use.
The
next generation of biofuels—cellulosic—made from switchgrass, corn stover,
wood chips
and
other non-food sources promises even more significant reductions in greenhouse
gas
emissions
than corn-based ethanol – reductions of more than 86 percent compared with
gasoline.
1
This estimate relies on data on the current price difference between ethanol and
gasoline and the elasticity of supply
for
petroleum. Consequently, a range is presented.
2
Today’s
Biofuels Account for Only a Small Percentage of the Increase in Global Food
Prices.
Other
factors are responsible for the majority of the increase in global food prices:
_
Higher oil
and gas prices leading to increased costs of fertilizer, harvest, and
transportation;
_
Increased
demand as developing countries grow and people improve their diets;
_
Two years
of bad weather and drought leading to poor harvests in parts of the world;
_
Export
restrictions imposed by some countries.
Future
Biofuels Will Alleviate Much of the Concern about Competition Between Food and
Fuel.
Cellulosic
biofuel feedstocks can be produced on land not suitable for crops or it can be
collected
from
forest residues.
The
Administration has announced more than $1 billion for the research, development,
and
demonstration
of new biofuels technology, with a special focus on cellulosic biofuels. Funding
supports:
_
Bioenergy
Research Centers where scientists work together to make the conversion of plant
fiber
to fuel more cost-effective and efficient.
_
Commercial-scale
and small-scale biorefineries, to chart the course toward
commercialization
of these technologies and test breakthroughs and novel processes.
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