Some long-run effects of growing markets and renewable fuel standards on additives markets and the US ethanol industry

Paul W. Gallagher, Hosein Shapouri, Jeffrey Price, Guenter Schamel and Heather Brubaker

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The effects of likely regulatory and policy changes in the US gasoline and additives market are compared to a reference baseline. The baseline reflects existing EPA policies about fuel quality regulation and likely petroleum and gasoline expansions. The market and welfare effects are presented for implementing a renewable fuel standard; imposing a national ban on the additive MTBE; and removing the oxygen standard for reformulated fuel. Market and welfare estimates are based on adjusting product market demands and factor supplies. Product market and price analyses include quality-differentiated products, such as refinery gasoline, chemical additives and ethanol at the wholesale level; and gasoline grades in conventional, reformulated and oxygenated markets at the ratail level. Factor market analyses include supplies for petroleum, natural gas byproducts, and corn. The analysis includes the welfare cost of fuel to consumers and income in agriculture and the petroleum sector.

Date: 2003-09-01
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