Archive for Thursday, April 17, 2008

Bio-fuels pay at the pump

April 17, 2008

Recently, Merrill Lynch commodity strategist Francisco Blanch said gasoline prices would be 15 percent higher if biofuel production wasn't increasing.

That's good to know, especially in light of news last week from the U.S. Department on Energy that gas prices could peak at close to $4 a gallon this year.

Fuel costs impact every facet of our daily lives, whether it's filling up the car we drive to work, or the incremental increases we see in food costs at the grocery store.

Gas and diesel prices are closely tied to the prices we pay for crude oil, their base source. According to the U.S. Department on Energy, oil is expected to average $101 a barrel this year, despite an expected drop in overall consumption in the United States in response to climbing prices. That's because increasing demand from China, India, Russia and the Middle East continue to exert pressure on crude oil supplies, which keeps prices high.

But what does all this mean for consumers like you and me?

The national average number of miles any one of us drives in a year is 12,578, while the average fuel efficiency for all vehicles on American roads is 23.7 miles per gallon. Given these averages, it is safe to assume that American motorists use about 527 gallons of gasoline a year, or just more than 10 gallons a week.

If gas prices remained steady at $3.25 a gallon, and the positive net impact of biofuel production on gas prices remained at 15 percent, Kansas motorists would spend roughly $5 less a week on gas than they would without biofuels supplementing our gasoline supplies.

That $5-a-week saving computes to $263 a year per motorist. If you live in a two-car household like me, the saving is $523 per household per year.

My simplified equation might not take into account every possible variable, but it does illustrate the positive economic impact biofuels has on each of us. The impact is even more profound when you look at state and national numbers.

Just more than 1 billion gallons of gasoline were sold in Kansas last year. If you consider the same 50 cent per gallon saving, Kansans are spending about $500 million less a year on gasoline than they would if biofuels weren't part of the mix.

On a national scale, we are spending $71 billion less.

Most of us already feel good about the positive impact renewable fuels have on our environment. Now we know they also have a significant impact on what we pay at the pump.

- Adam Polansky is the Kansas Secretary of Agriculture


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