Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

gasoline use scenarios will cost the U.S. $0.5 billion to around $1.6 billion in the year
2012. Expressed as per-gallon costs, these fuel changes would cost the U.S. 0.3 to just
over 1 cent per gallon of gasoline.
b. Gasoline Costs Including Ethanol Consumption Tax Subsidies
Table VII.C.5.b-1 expresses the total and per-gallon gasoline costs for the four
control scenarios with the federal and state ethanol subsidies included. The federal tax
subsidy is 51 cents per gallon for each gallon of new ethanol blended into gasoline. The
state tax subsidies apply in 5 states and range from 1.6 to 29 cents per gallon. The cost
reduction to the fuel industry and consumers are estimated by multiplying the subsidy
times the volume of new ethanol estimated to be used in the state. The costs are
presented for the case that ethanol causes butanes to be withheld from the wintertime
gasoline pool, and for the case that the blending of butanes remains unchanged.
Table VII.C.5.b-1
Estimated Cost Including Subsidies ($47/bbl crude)
(million dollars, except where noted)
7.2 Bil Gals 7.2 Bil Gals 9.6 Bil Gals 9.6 Bil Gals
Max RFG Min RFG Max RFG Min RFG
Butane Removed
in Winter
Yes No Yes No Yes No Yes No
Total Cost
without Subsidies
619 582 548 496 1,606 1,542 1,507 1,426
Federal Subsidy -1,684 -1,684 -1,684 -1,684 -2,908 -2,908 -2,908 -3,908
State Subsidies -180 -180 -173 -173 -189 -189 -176 -176
Total Cost
Including
Subsidies
-1,245 -1,282 -1,308 -1,361 -1,491 -1,555 -1,578 -1,657
Per-Gallon Cost
Including
Subsidies
(cents/gallon)
-0.82 -0.84 -0.86 -0.89 -0.98 -1.02 -1.03 -1.08
The cost including subsidies better represents gasoline’s production cost as might
be reflected to the fuel industry as a whole and to consumers “at the pump” because the
federal and state subsidies tends to hide a portion of the actual costs. Our analysis
suggests that the fuel industry and consumers will see a 0.8 to 1.1 cent per gallon
decrease in the apparent cost of producing gasoline with these changes to gasoline.
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