Facts At A Glance

GAO: IN COST AND EFFICIENCY, ETHANOL FAILS TO COMPETE WITH GASOLINE

"The reality, according to GAO's report, is that regular unleaded gasoline is still far more affordable than ethanol in its various forms. The GAO also noted that the federal government lacks a strategy for coordinating expanded biofuel production with the creation of a distribution system and development of compatible vehicles. With these facts in mind, it is far too premature to consider expanding the new RFS, before it's even implemented, and ultimately shifting the nation's dependency on petroleum to another that's costly, unproven and less efficient."

Charles T. Drevna
Executive Vice President, National Petrochemical & Refiners Association (NPRA)
June 12, 2007

The Realities: More Costly, Less Efficient

"Ethanol and biodiesel production is rapidly increasing, but the challenge of producing biofuels at a lower cost than that of petroleum fuels makes it unlikely that they will displace a considerable amount of petroleum in transportation fuels until less expensive production processes are developed. From 2004 to 2006, annual U.S. ethanol production increased from 3.4 billion gallons to about 4.9 billion gallons, and annual biodiesel production expanded from 28 million gallons to approximately 287 million gallons. Despite these rapid increases, ethanol and biodiesel together composed only about 3 percent of gasoline and diesel motor fuel used in 2006. About 99 percent of the ethanol produced in 2006 was blended with gasoline at levels of 10 percent or less, and most biodiesel was blended with diesel fuel at levels of 20 percent or less." (U.S. Government Accountability Office, "Biofuels: DOE Lacks a Strategic Approach to Coordinate Increasing Production with Infrastructure Development and Vehicle Needs,"June 1007, p. 5 [emphasis added])

"A key challenge to increasing biofuel production is making biofuels cost competitive with gasoline and diesel fuel. The higher costs of producing biofuels contributes to higher biofuel wholesale prices compared to those for gasoline or diesel, making biofuels less desirable as a substitute. For example, based on a March 2007 estimate provided by USDA, the cost to produce a gallon of ethanol, including the cost of corn and processing, is about $2.51 per gallon of gasoline equivalent, while based on [GAO's] analysis of EIA estimates, in January 2007, the crude oil and refining components of the retail price of gasoline were about $1.46 per gallon. In 2006, the average wholesale price of ethanol was 33 percent more on a per volume basis than the wholesale price of a gallon of regular unleaded gasoline and about 102 percent more expensive on a gallon of gasoline equivalent basis." (U.S. Government Accountability Office, Biofuels: DOE Lacks a Strategic Approach to Coordinate Increasing Production with Infrastructure Development and Vehicle Needs," June 1007, p. 15-16 [emphasis added])

"DOE has not yet developed a comprehensive strategic approach to coordinate the expansion of biofuel production with biofuel distribution infrastructure development and vehicle production, and has not evaluated the effectiveness of biofuel tax credits. It is currently not known what blend of ethanol-E10, E85, or something in between-would most effectively and efficiently increase the use of the fuel; what level of distribution infrastructure development or vehicle production is needed to support that blend level; and when the infrastructure and vehicles will be needed." (U.S. Government Accountability Office, Biofuels: DOE Lacks a Strategic Approach to Coordinate Increasing Production with Infrastructure Development and Vehicle Needs," June 1007, p. 7 [emphasis added])

"Despite the federal and state efforts to support and promote ethanol and biodiesel, the public has been slow to accept them because they have not been cost competitive or readily available compared to relatively cheap and abundant petroleum-based fuels. Furthermore, because biofuels contain less energy per gallon than their petroleum-based counterparts, consumers must purchase more of the fuels to travel the same distance. A gasoline blend containing 10 percent ethanol results in a 2 to 3 percent decrease in miles-per-gallon fuel economy, while in a higher blend such as E85, the decrease is proportionally larger. The energy content of a gallon of biodiesel is about 8 percent lower than that of petroleum diesel, causing vehicles running on B20, for example, to experience about a 2 percent decrease in miles per gallon, while for vehicles running on B100, the decrease is proportionally larger." (U.S. Government Accountability Office, Biofuels: DOE Lacks a Strategic Approach to Coordinate Increasing Production with Infrastructure Development and Vehicle Needs," June 1007, p. 10-11 [emphasis added])