An ethanol blend wall shift is prone to increase petroleum gasoline demand

Cheng Qiu, Gregory Colson and Michael Wetzstein

Energy Economics, 2014, vol. 44, issue C, 160-165

Abstract: In 2010, the U.S. Environmental Protection Agency announced a waiver allowing an increase in the fuel–ethanol blend limit (the “blend wall”) from 10% (E10) to 15% (E15). Justifications for the waiver are reduced vehicle-fuel prices and less consumption of petroleum gasoline, leading to greater energy security. Empirical investigations of this waiver using Monte Carlo simulations reveal an anomaly where a relaxation of this blend wall elicits a demand response. Under a wide range of elasticities, this demand response can actually increase the consumption of petroleum gasoline and thus lead to greater energy insecurity. The economics supporting this result and associated policy implications are developed and discussed.

Keywords: Blend wall; Energy security; Ethanol (search for similar items in EconPapers)
JEL-codes: Q16 Q18 Q41 Q42 Q48 Q50 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: An Ethanol Blend Wall Shift is Prone to Increase Petroleum Gasoline Demand (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:44:y:2014:i:c:p:160-165

DOI: 10.1016/j.eneco.2014.04.005

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