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An Ethanol Blend Wall Shift is Prone to Increase Petroleum Gasoline Demand

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  • Qiu, Cheng
  • Colson, Gregory
  • Zhang, Zibin
  • Wetzstein, Michael E.

Abstract

The US Environmental Protection Agency announced a waiver allowing an increase in the Fuel-Ethanol blend limit (the “blend wall” ) from 10% (E10) to 15% (E15) on October,2010.Justifications for the waiver are reduced vehicle fuel prices and less consumption of petroleum gasoline, leading to energy security. In this paper, employing Monte Carlo simulations and Savitzky-Golay smoothing filter, an empirical study examines this waiver revealing 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.

Suggested Citation

  • Qiu, Cheng & Colson, Gregory & Zhang, Zibin & Wetzstein, Michael E., 2011. "An Ethanol Blend Wall Shift is Prone to Increase Petroleum Gasoline Demand," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98795, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea11:98795
    DOI: 10.22004/ag.econ.98795
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    Cited by:

    1. Roach, Travis, 2019. "Market power and second degree price discrimination in retail gasoline markets," Energy Economics, Elsevier, vol. 84(C).
    2. Sebastien Pouliot & Bruce A. Babcock, 2014. "Impact of Ethanol Mandates on Fuel Prices when Ethanol and Gasoline are Imperfect Substitutes," Center for Agricultural and Rural Development (CARD) Publications 14-wp551, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. 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.
    4. Peter Maniloff, 2013. "Ethanol and Energy Security," Working Papers 2013-10, Colorado School of Mines, Division of Economics and Business.
    5. Miljkovic, Dragan & Ripplinger, David & Shaik, Saleem, 2016. "Impact of biofuel policies on the use of land and energy in U.S. agriculture," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1089-1098.
    6. Pontau, Patricia & Hou, Yi & Cai, Hua & Zhen, Yi & Jia, Xiaoping & Chiu, Anthony S.F. & Xu, Ming, 2015. "Assessing land-use impacts by clean vehicle systems," Resources, Conservation & Recycling, Elsevier, vol. 95(C), pages 112-119.
    7. Wang, Zidong & Fan, Xin Xin & Liu, Pan & Dharmasena, Senarath, 2016. "Demand for Ethanol in the Face of Blend Wall: Is it a Complement or a Substitute for Conventional Transportation Fuel in the United States?," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229960, Southern Agricultural Economics Association.
    8. Trumbo, Jennifer L. & Tonn, Bruce E., 2016. "Biofuels: A sustainable choice for the United States' energy future?," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 147-161.

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    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • 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
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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