Mo. Corn funds favorable ethanol study

JEFFERSON CITY - A study released Monday and paid for by the Missouri Corn Merchandising Council suggests ethanol could save Missourians almost 10 cents per gallon of gasoline this year.

John Urbanchuk of the independent consulting firm LECG headed the analysis of the effects of a 10-percent ethanol blend, or E10, on gas prices in Missouri. He said that although forecasting gas prices is difficult, he thinks Missourians could save an average of 7.2 cents per gallon over the next 10 years, or $70 to $75 per year, by using ethanol-blended fuel.

As of Jan. 1, 2008, gasoline sold in Missouri must contain 10 percent ethanol, which is produced in part from corn and soybeans. This blend is known as E10.

Urbanchuk said the blend, which he has used for several years, will have a "very real" impact on the economy.

"We're looking at the development of homegrown manufacturing sector here," he said. "They're American jobs, Missouri jobs, that produce ethanol made from corn grown by Missouri farmers. That money stays in these communities."

But Sen. Luann Ridgeway, R-Smithville, said requiring consumers to use ethanol fuel, which uses almost 30 percent of the state's corn, could have a devastating effect on Missouri's economy.

"We have created an artificial market for ethanol which otherwise may not have existed," she said. "As a result, the price of corn ... will escalate very rapidly, far beyond what it would have. Consumers will certainly pay more for their gasoline and for food."

Ridgeway said the mandate would specifically hurt independent farmers.

"This will also have a devastating effect on the small family farmer that's been part of the backbone of our economy that's kept our food prices low," she said. "The small family farmer may have problems absorbing the increased grain cost."

She recommended other options to get consumers to use ethanol, including tax credits for using the E10 blend or purchasing a hybrid car.

The use of ethanol fuel blends has caused some concern over their efficiency compared to straight unleaded gasoline, but Urbanchuk said the loss of fuel efficiency at an E10 level is "negligible."

A 2005 study by the pro-ethanol association American Coalition for Ethanol that tested blended fuels in three different makes of vehicles found that the vehicles averaged 1.5 percent lower miles per gallon with E10 than with straight unleaded gasoline.

But as the levels of ethanol in fuel blends increase sharply, mileage efficiency decreases more noticeably. The state Agriculture Department estimates that gas mileage decreases by 10 to 20 percent when E85, an 85-percent ethanol and 15-percent gasoline blend, is used. The U.S. Department of Energy estimates a 20- to 30-percent drop in miles per gallon with E85.

MFA Oil President Jerry Taylor said he uses ethanol to stay competitive among other distributors.

"Today, all distributers are blending and will continue to blend, in my judgment, with or without a renewable fuel standard simply due to the economics," he said.

Urbanchuk acknowledged that the cost of producing ethanol is currently more expensive than producing gasoline, but he said that's why tax credits exist -- to reduce the cost and maintain demand for ethanol so that the industry becomes competitive with the petroleum industry.

The consulting firm LECG received $12,000 from the Corn Merchandising Council for the cost of the study.