By KEVIN WALKER
Michigan Correspondent

WASHINGTON, D.C. — Late last month, the Consumer Federation of America announced its latest report on gasoline prices, citing increased ethanol production as a growing factor in the motor fuels market.

The purpose of the report, called Rising Gasoline Prices: Why Can’t Consumers Catch A Break? is to alert the general public about how much gasoline is likely to rise in the immediate future and to explain who is to blame, in its view. In the process, the report’s author, Mark Cooper, also points to the increasing role of ethanol in the fuels market, which he sees as largely positive.

“As we stand here in March of 2008, the combination of 100,000 barrels a day of reduced demand and 600,000 barrels a day of ethanol production – which is now getting into the transportation fuel stream – that combination, that increase in capacity for the system is equal to the total increase of operable capacity that the refinery sector added since the turn of the 20th century,” Cooper said in remarks given the same day the report was released.

“We really want to alert the press and policymakers to sharpen their focus on spring cleaning in the oil industry this year. What’s happening to ethanol? Are they still increasing the blending of ethanol? If consumers do not get some price relief this year, there ought to be hell to pay.”

Yet, Cooper predicted gas prices could go up to $4 a gallon by Memorial Day. He also warned consumers about a report that Exxon is trying to gain control over the blending of ethanol in facilities it controls. He said ethanol producers should be concerned and fearful of any such development.

The report also blames refiners for squeezing the supply of gas by not building more refineries. It states that the profit for refiners is the price of gas, minus gas taxes and the amount the refiners pay for crude oil. According to Cooper, this profit, also known as the domestic spread, has been increasing during the past several years as a percent of the total cost of gas. He blames the refiners for acting like a cartel or an oligopoly.

On the other hand, he praises farmers for behaving like capitalists because they are increasing the amount of ethanol production as they are able to make more money from it.

“Farmers are not members of the oil oligopoly or the cartel,” he said.

A reporter asked Cooper if ethanol production will bring down the price of gas. He answered that ethanol is substantially less expensive today than gasoline.

“That’s why it’s being blended, for economic reasons. If you’re a distributor, and you’re looking at 40 to 50 cents less, you’re going to blend it. Will you pass that through to the consumer, that’s the big question. We don’t know yet,” he said.

He also said ethanol production has taken a “huge bite” out of the refinery shortfall. In other words, ethanol has increased the supply of motor fuel to the consumer.

Cooper also spoke briefly about the “food versus fuel” debate. He said though there is a relationship between the price of food and ethanol production, he believes it’s been exaggerated.

“What it costs to feed the cow matters, but what it costs to drive the milk to market also has a big impact,” he said.

He estimates ethanol production will expand, by the end of this year, to 750,000-800,000 barrels per day.

“That’s a really big number. It’s a tremendous game-changer in the marketplace,” he said.

The entire report, which is 36 pages, can be read online at www.consumerfed.org/pdfs/2008gasolineprices.pdf

This farm news was published in the April 16, 2008 issue of the Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.