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Relationship between ethanol and gasoline: AIDS approach

Author

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  • Tenkorang, Frank
  • Dority, Bree L.
  • Bridges, Deborah
  • Lam, Eddery

Abstract

Ethanol production in the United States has increased significantly due to government support, which has begun to dwindle. Ethanol now seems to compete with gasoline for vehicle fuel but because ethanol is mostly sold as a blend, gasoline and ethanol could be complementary fuel sources. The study investigates the true relationship between these fuels since it has policy implications. Results of LA/AIDS estimation show the two fuels were substitutes before the rapid expansion of ethanol production but have become complements overtime due to increasing share of ethanol in fuel consumption.

Suggested Citation

  • Tenkorang, Frank & Dority, Bree L. & Bridges, Deborah & Lam, Eddery, 2015. "Relationship between ethanol and gasoline: AIDS approach," Energy Economics, Elsevier, vol. 50(C), pages 63-69.
    • Handle: RePEc:eee:eneeco:v:50:y:2015:i:c:p:63-69
    DOI: 10.1016/j.eneco.2015.04.019
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    Cited by:

    1. Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, vol. 9(6), pages 1-16, June.
    2. Ghoddusi, Hamed, 2017. "Blending under uncertainty: Real options analysis of ethanol plants and biofuels mandates," Energy Economics, Elsevier, vol. 61(C), pages 110-120.
    3. Rowland, Christopher S. & Mjelde, James W. & Dharmasena, Senarath, 2017. "Policy implications of considering pre-commitments in U.S. aggregate energy demand system," Energy Policy, Elsevier, vol. 102(C), pages 406-413.

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    More about this item

    Keywords

    Ethanol; LA/AIDS; Gasoline; Price elasticity; Complements; Substitutes;
    All these keywords.

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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