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Reducing Fuel Volatility - An Additional Benefit From Blending Bio-fuels?

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  • R.E. Bailis
  • B.S. Koeb
  • M.W.J.L. Sanders

Abstract

Oil price volatility harms economic growth. Diversifying into different fuel types can mitigate this effect by reducing volatility in fuel prices. Producing bio-fuels may thus have additional benefits in terms of avoided damage to macro-economic growth. In this study we investigate trends and patterns in the determinants of a volatility gain in order to provide an estimate of the tendency and the size of the volatility gain in the future. The accumulated avoided loss from blending gasoline with 20 percent ethanol-fuel estimated for the US economy amounts to 795 bn. USD between 2010 and 2019 with growing tendency. An amount that should be considered in cost-benefit analysis of bio-fuels.

Suggested Citation

  • R.E. Bailis & B.S. Koeb & M.W.J.L. Sanders, 2011. "Reducing Fuel Volatility - An Additional Benefit From Blending Bio-fuels?," Working Papers 11-01, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:1101
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    Cited by:

    1. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2011. "Biofuels: Review of Policies and Impacts," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5v1112qr, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
    3. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Regime-dependent topological properties of biofuels networks," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 86(2), pages 1-12, February.
    4. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, vol. 37(C), pages 141-151.

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