Review of the Impact of Biofuels on U.S. Retail Gasoline Prices

Abstract

This study aims to provide a review of the state-of-the-art literature regarding the impacts and contributions of corn ethanol on retail gasoline prices in the US. For this, a systematic literature review following PRISMA statement was carried out, seeking to answer four research questions: (1) What are the main characteristics of the literature regarding the impact and contributions of ethanol on US retail gasoline prices? (2) What are the main article clusters identified in the evaluated literature? (3) What was the numerical impact of the Volumetric Ethanol Excise Tax Credit/Renewable Fuel Standard (VEETC/RFS) mandate on the price of gasoline and what are the main methods used for calculation in the literature? (4) What are the main trends and possibly new research directions for this literature? As a result of the characterization of the sample, driving themes, such as energy policy, costs, price dynamics, trade and energy market, were identified. Furthermore, three main clusters were identified in the sample: (i) impacts of biofuels on commodity prices and general price dynamics; (ii) impacts of public policies on the implementation of ethanol and flexibility in formulating fuel blends; and (iii) impact of biofuels on environmental aspects. As a practical implication, the prevailing result in the analyzed literature is that the addition of ethanol reduces the price of gasoline at the pump, and estimates range from no effect to nearly 10% off the price of gasoline. Finally, the topic on the impacts of biofuels on commodity prices and on the general dynamics of prices is the most relevant research line and the trend suggested by the proposed research agenda.