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

c. Cost Sensitivity Case Assuming $70 per Barrel Crude Oil
As described above, we analyzed a sensitivity analysis with the future price of
crude oil remained at today’s prices which is around $70 per barrel. This analysis was
conducted by applying about a 1.4 multiplication factor times the 2004 gasoline
production costs, MTBE and alkylate feedstock costs and butane value. This factor was
derived by examining the historical association between increasing wholesale gasoline
prices with increasing crude oil prices. We did not adjust the distribution costs, any of
the utility costs, octane value and ethanol prices based on the assumption that these
would change much less and therefore we kept them the same as that used in the primary
analysis. The cost results of the sensitivity analysis are provided with and without the
ethanol consumption subsidies in Table VII.C.5.c-1.
Butane
Removed in
Winter
Total Cost
without
Subsidies
($million)
Per-Gallon
Cost
without
Subsidies
(c/gal)
Total Cost
Including
Subsidies
($million)
Per-Gallon
Cost
Including
Subsidies
(c/gal)
Table VII.C.5.c-1
Estimated Costs for Crude Oil Priced at $70 per barrel
(million dollars and cents per gallon)
7.2 Bil Gals 7.2 Bil Gals 9.6 Bil Gals 9.6 Bil Gals
Max RFG Min RFG Max RFG Min RFG
Yes No Yes No Yes No Yes No
-171 -187 -223 -245 222 196 138 105
-0.11 -0.12 -0.15 -0.16 0.15 0.13 0.09 0.07
-2,035 -2,051 -2,080 -2,102 -2,875 -2,901 -2,945 -2,978
-1.34 -1.35 -1.37 -1.38 -1.88 -1.90 -1.93 -1.95
If crude oil stays priced at around $70 per barrel, the cost of these fuel changes
would decrease significantly. In fact, we estimate that the 7.2 billion gallon ethanol case
would result in a cost savings to the U.S. even if butanes are removed from the
wintertime gasoline pool when ethanol is added. When considering the ethanol subsidies,
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