Can increasing gasoline supply in the United States affect ethanol production in Brazil?

The increasing supply of non-conventional oil in the U.S. has changed the dynamics of crude oil market and the flow of oil products in the Atlantic Basin. The Gulf of Mexico (GoM) emerges as an exportation hub of oil products, contributing to a scenario in which gasoline prices tend to decline. Meanwhile, from 2010, the competitiveness of the Brazilian sugarcane ethanol has been ruptured by the country's gasoline price policy that had not followed international price parity. The political conjuncture of the U.S. incites high utilization rates of their refining system in the GoM. In this context the profitability of the ethanol business can be impacted in Brazil, by either the current policy of controlled domestic gasoline prices or a future scenario of declining gasoline international prices. Therefore, this study tests if this gasoline price scenario can compromise even more the competitiveness of the Brazilian ethanol. Particularly, for a scenario of falling prices, ethanol production in Brazil would be under strong pressure of gasoline supply coming from the U.S. This can impact Brazil's ethanol industry, whose development has been justified by climate change policies. In that sense, the paper also discusses the future opportunities and challenges for Brazil's ethanol industry.     

Long-term energy projections for the U.S.A.

This report starts by surveying a series of papers that are representative of recent U.S. work on national and international energy policy. Among professional analysts, there are the beginnings of a consensus on energy demand projections and on energy-economy interactions. Moreover, it is recognized that conservation policies will be difficult to implement unless domestic prices are raised to the international level. The paper includes a series of long-term energy projections based upon ETA-MACRO. This model allows for: energy-economy interactions, cost-effective conservation and interfuel substitution between electric and nonelectric energy. the calculations are based upon a somewhat less optimistic view of synthetic fuels and of ‘backstop’ technologies than appear in the Carter Administration's recent proposals. With synfuels, backstops and nuclear energy—and with realistically reduced projections of demand growth—there is a reasonable prospect that the U.S. could meet an international commitment to limit oil and gas imports. U.S. import reductions could be achieved directly through the market price mechanism, without tariffs or quota limitations. For this to happen, however, the international price of oil would have to be doubled (in constant dollar terms) by the year 2000. A policy of gradual OPEC oil price increases would facilitate the transition away from oil, and could serve the long-run interests of both the producing and consuming nations.     

Natural gas prices, LNG transport costs, and the dynamics of LNG imports

According to the U.S. Energy Information Administration, LNG is projected to become a much larger share of U.S. natural gas consumption, rising from current levels of around 2.5% of total natural gas consumption to 12.4% by 2030. Because natural gas and LNG are substitutes, natural gas prices are expected to be an important determinant of LNG imports. Furthermore, an increasing share of LNG is traded under short-term contracts with spot shipments being diverted to markets offering the highest returns (netbacks). Relative natural gas prices as well as LNG transportation costs are important determinants of LNG netbacks. This paper examines the empirical relationship between U.S. LNG imports, the Henry Hub price of natural gas relative to U.K. and Asia gas prices, and a proxy for LNG transportation costs using monthly data from 1997 to 2007. Granger causality tests, error variance decomposition, and impulse response analyses using a VAR model are employed to establish Granger-causality as well as the dynamics of natural gas prices and LNG transportation innovations on LNG imports.     

Findings of the second international conference on energy use management—ICEUM-II

It is evident that future worldwide patterns of energy use will be modifications of current ones. The objective of this work is to understand the directions these modifications are taking and to assess opportunities for bringing about beneficial changes and avoiding detrimental ones.

The future will see greater deficits of conventional fuels such as oil and gas and the certainty of higher prices. Fuel and electricity prices, already at record highs, are seen to double again in the next 1–2 years. As a consequence of potential scarcity, disruption of supplies and economic pressures, the danger of a major war is greater now than it has been in the past several decades. The problem is compounded by the fact that the public, in general, is not convinced there is a serious problem and is not prepared to take decisive action.

The United States—the world's major energy user—plays a pivotal role. The consequences of an ineffective U.S. national energy policy have been that U.S. imports remain high, oil prices stay high, the world economy is less stable and less oil is available for other nations. Commensurately, increased prices for food, industrial products, and transportation are resulting.

At this time, changing energy futures is less a problem of technology and more a problem of motivation, values and social awareness. New technology is available for many industrial processes, for heating and cooling buildings, for lighting and agriculture. New technology is urgently needed for energy efficient transportation. Unresolved are the issues of how best to educate and inform the public and to instill new values appropriate for the future. The public, in general, still is not convinced that there is a serious problem and still is not prepared to take decisive actions.

New energy resources are widely sought as replacements for conventional ones, especially those which are imported. While these efforts will lead to varying degrees of success, energy use management has been established during the decade of the 1970s as an effective near-term ‘resource’. It is the most immediate, least risky, cheapest and least environmentally damaging of all the potential options for solving energy problems. National and international policies must be modified to vastly increase the priority given this resource.     

The greenland hydropower as a source of electrolytic hydrogen

A preliminary assessment of the Greenland hydropower potential is presented. Based on classical exploitation techniques the proven mean annual power capacity is estimated at 15–40 GW while the ultimate potential is between 100 GW and 1 TW.

This potential will not only satisfy the energy needs of Greenland itself but will also allow for large scale energy export. One of the best solutions for transporting this energy is the in situ synthesis of ammonia on the basis of liquefied air and electrolytic hydrogen, a suggestion already made in the project “Energy Depot” of the U.S. army. The ammonia would then be shipped overseas by LNG-tankers in liquid form. Expected costs are comparable to current prices on the world's market.     

Impact of US biofuel policy on US corn and gasoline price variability

Despite a large number of studies that examine the influence of biofuels and biofuel policy on commodity prices, the impact of biofuel policy on commodity price variability is poorly understood. A good understanding of biofuel policy’s impact on price variability is important for mitigating food insecurity and assisting policy formation. We examine how U.S. ethanol policies such as the Renewable Fuel Standard (RFS) mandates and the blend wall affect the price variability of corn and gasoline. We first present an analytical and graphical framework to identify the effect and then use stochastic partial equilibrium simulation to measure the magnitude of the impacts. We show that RFS mandates and the blend wall both reduce the price elasticity of demand for corn and gasoline and therefore increase the price variability when supply shocks occur to the markets. This has important implications for policy actions with respect to maintaining or changing the current RFS mandates and/or blend wall in the US.     

Forecasting gasoline prices in the presence of Edgeworth Price Cycles

Forecasting is a central theme in economics. The ability to forecast prices enables economic agents to make optimal decisions for the present and future. In this article, we investigate if and how gasoline prices can be forecast in retail gasoline markets that are subject to high-frequency, asymmetric price cycles known as Edgeworth Price Cycles. We examine a series of purchase timing decision rules and a series of feasible forecasting algorithms for updating those rules over time. We find that, in the presence of cycles, agents in our five Australian markets can systematically reduce purchase prices below market average the equivalent of 11 to 15 U.S. cents per gallon, using simple decision rules and feasible forecasting algorithms.     

Asymmetry in retail gasoline and crude oil price movements in the United States: An application of hidden cointegration technique

There is a common belief that gasoline prices respond more quickly to crude oil price increases than decreases. Some economists and politicians believe that asymmetry in oil and gasoline price movements is the outcome of a non-competitive gasoline market requiring that governments take policy action to address “unfair pricing”. There is no consensus as to the existence, or nature, of the asymmetric relationship between prices of gasoline and crude oil. Much of this literature specifies asymmetry in the speed of adjustment and short-run adjustment coefficients. In contrast, Granger and Yoon's [Granger, C.W. and Yoon, G. “Hidden Cointegration”, University of California, San Diego, Department of Economics Working Paper, (2002).] Crouching Error Correction Model (CECM) identifies asymmetry of the cointegrating vectors between components (cumulative positive and negative changes) of the series. Applying the CECM to retail gasoline and crude oil prices for the U.S., we find that there is only evidence of cointegration between positive components of crude oil prices and negative components of gasoline prices. In contrast to the literature which attributes asymmetric price movements to market power of refiners, these findings suggest that gasoline prices –in the long run– are more influenced by the technological changes on the demand side than crude oil price movements on the supply side.     

Correlation between Chinese and international energy prices based on a HP filter and time difference analysis

To establish a reasonable system and mechanism for Chinese energy prices, we use the Granger causality test, Hodrick–Prescott (HP) filter and time difference analysis to research the pricing relationship between Chinese and international energy prices. We find that Chinese and international crude oil prices changed synchronously while Chinese refined oil prices follow the changes of international oil prices with the time difference being about 1 month to 2 months. Further, Australian coal prices Granger causes Chinese coal prices, and there is a high correlation between them. The U.S. electricity price is influenced by the WTI crude oil price, the U.S. gasoline price and the HenryHub gas price. Due to the unreasonable price-setting mechanism and regulation from the central government, China′s terminal market prices for both electricity and natural gas do not reflect the real supply–demand situation. This paper provides quantitative results on the correlation between Chinese and international energy prices to better predict the impact of international energy price fluctuations on China′s domestic energy supply and guide the design of more efficient energy pricing policies. Moreover, it provides references for developing countries to improve their energy market systems and trading, and to coordinate domestic and international energy markets.     

Market penetration of ethanol

This research examines in detail the technology and economics of substituting ethanol for gasoline. This endeavor examines three issues. First, the benefits of ethanol/gasoline blends are examined, and then the technical problems of large-scale implementation of ethanol. Second, ethanol production possibilities are examined in detail from a variety of feedstocks and technologies. The feedstocks are the starch/sugar crops and crop residues, while the technologies are corn wet mill, dry grind, and lignocellulosic fermentation. Examining in detail the production possibilities allows the researchers to identity the extent of technological change, production costs, byproducts, and GHG emissions. Finally, a U.S. agricultural model, FASOMGHG, is updated which predicts the market penetration of ethanol given technological progress, variety of technologies and feedstocks, market interactions, energy prices, and GHG prices.FASOMGHG has several interesting results. First, gasoline prices have a small expansionary impact on the U.S. ethanol industry. Both agricultural producers’ income and cost both increase with higher energy prices. If wholesale gasoline is $4 per gallon, the predicted ethanol market penetration attains 53% of U.S. gasoline consumption in 2030. Second, the corn wet mill remains an important industry for ethanol production, because this industry also produces corn oil, which could be converted to biodiesel. Third, GHG prices expand the ethanol industry. However, the GHG price expands the corn wet mill, but has an ambiguous impact on lignocellulosic ethanol. Feedstocks for lignocellulosic fermentation can also be burned with coal to generate electricity. Both industries are quite GHG efficient. Finally, U.S. government subsidies on biofuels have an expansionary impact on ethanol production, but may only increase market penetration by an additional 1% in 2030, which is approximately 6 billion gallons.     

The asymmetric response of gasoline prices to oil price shocks and policy uncertainty

This study shows that the effect of oil price shocks on the real price of gasoline is interrelated with economic policy uncertainty. Economic policy shocks are linked with increased real price of gasoline and reduced consumption of gasoline. There is evidence that the fluctuation of both real gasoline prices and of gasoline consumption is associated with uncertainty of tax legislation expiration expectation as well as other components of economic policy uncertainty. Positive shocks to economic policy uncertainty have relatively larger effects on gasoline prices than do negative shocks to economic policy uncertainty. Economic policy uncertainty responds asymmetrically to increases and decreases in real oil price. Shocks to economic policy uncertainty account for 16.1% of variation in real gasoline prices and for 4.9% of variation in gasoline consumption in the long-run.     

Another perspective on gasoline price responses to crude oil price changes

The effects of oil price volatility on the responses of gasoline prices to oil price shocks have received little attention in discussions on the relationship between the prices of crude oil and gasoline. In this paper we consider such effects by using a bivariate structural vector autoregression which is modified to accommodate GARCH-in-mean errors. Our measure of oil price volatility is the conditional variance of the oil price–change forecast error. We isolate the effects of volatility in the price of oil on the price of gasoline and employ simulation methods to calculate nonlinear impulse response functions (NIRFs) to trace any asymmetric effects of independent oil price shocks on the conditional means of gasoline prices. We test whether the relationship between the prices of crude oil and gasoline is symmetric using tests of the null hypothesis of symmetric impulse responses. Based on monthly U.S. data over the period from 1978:1 to 2014:11, our empirical results show that gasoline prices respond asymmetrically to positive and negative oil price shocks. We also find that oil price volatility has a positive effect on the price of gasoline and it contributes to the asymmetries in the transmission of oil price shocks.     

Is there a role for biofuels in promoting energy self sufficiency and security? A CGE analysis of biofuel policy in Thailand

Given the rising price of crude oil, some developing countries including Thailand are looking towards developing their domestic renewable energy resources, in particular biofuels. However, there are concerns about the possible adverse effects such a policy strategy would have on key variables such as sectoral output, land allocation and the effects of prices, particularly food prices. This study develops a computable general equilibrium (CGE) model of the Thailand economy that features enhancements of the energy sector and uses it to analyze the government’s recent renewable energy development plan. This plan aims to increase domestic energy use from renewable sources to replace fossil fuel imports. The study simulated specific policies contained in the plan. Among other things, we found that promoting biofuel use causes a rapid increase in the price of biofuel and biofuel feedstock in the short-run, whereas these prices only increase slightly in the long-run due to more elastic supplies. The prices of food and other products marginally increase, implying that food security is not undermined by the policy. On the basis of the findings, the study recommends a review of some of the targets because they were found to be rather high, and a phasing in of others.     

Harvesting operations and energetics of tall grasses for biomass energy production: A case study

The U.S.A. imports about 50% of its energy needs while Florida imports about 85%. Among the renewable energy sources available, biomass appears promising especially in the southeast which includes Florida because of a favorable environment for production and the available methods to convert biomass to energy. Optimal production of biomass requires the identification and management of high yielding persistent perennial cultivars. Elephantgrass (Pennisetum purpureum Schum.) and energycane (Saccharum spontaneum L.) are two tall grasses that meet these requirements. To optimize the supply of convertible biomass, suitable methods of harvesting the crop must be available. The purpose of this research was to study the feasibility and energetics of harvesting, drying, and baling tall grasses with conventional farm machinery.

A Mathews rotary scythe and a New Holland 849 Auto Wrap large round baler were determined to provide a practical harvesting system for baled biomass averaging 15–27 Mg ha⁻¹. The rotary scythe can be used for harvesting and fluffing or turning a windrow over to expedite drying. This harvesting system requires about 3 kg diesel fuel Mg⁻¹ dry biomass (DB), 25 min of time Mg⁻¹ DB, and a cost of about $10 to 12 Mg⁻¹ DB. Energy requirements of harvesting operations would be about 300–375 MJ Mg⁻¹ DB, and primary energy requirements for production and harvesting are about 1100–1500 MJ Mg⁻¹ DB. For each unit of fossil fuel invested in the total production and harvesting system, 12–15 units would be returned in biomass.     

The asymmetry of gasoline prices: fresh evidence from an error correction model for U.K. and U.S.A.

An error correction model was fitted to monthly data on net retail gasoline prices for the U.K. and the U.S.A. over the period January 1980–June 1996 in order to examine the short-run response of gasoline prices to changes in crude oil costs and exchange rate. The hypothesis of a symmetric response by gasoline station owners to crude oil price rises and falls was rejected by the data for both the U.K. and the U.S.A. A similar hypothesis in regard to the exchange rate was also rejected by the data. © 1998 John Wiley & Sons. Ltd.     

Tax exemption for biofuels in Germany: Is bio-ethanol really an option for climate policy?

In 2002 the German Parliament decided to exempt biofuels from the gasoline tax to increase their competitiveness compared to conventional gasoline. The policy to promote biofuels is being justified by their allegedly positive effects on climate, energy, and agricultural policy goals. An increased use of biofuels would contribute to sustainable development by reducing greenhouse-gas emissions and the use of non-renewable resources. The paper takes a closer look at bio-ethanol as a substitute for gasoline. It analyzes the underlying basic German, European, and worldwide conditions that provide the setting for the production and promotion of biofuels. It is shown that the production of bio-ethanol in Germany is not competitive and that imports are likely to increase. Using energy and greenhouse-gas balances we then demonstrate that the promotion and a possible increased use of bio-ethanol to reduce greenhouse-gas emissions are economically inefficient and that there are preferred alternative strategies. In addition, scenarios of the future development of the bio-ethanol market are derived from a model that allows for variations in all decisive variables and reflects the entire production and trade chain of bio-ethanol, from the agricultural production of wheat and sugar beet to the consumption of bio-ethanol in the fuel sector.     

Fuel price determination in transportation sector using predicted energy and transport demand

This study determines fuel price based on estimated sectoral energy and transport demand using pumping prices. Three approaches are first used for estimating energy and transportation demand based on linear time series, polynomial time series and genetic algorithm based (GATEDE and GATDETR), as multi-parameter, models. Then, future fuel prices and marginal costs of the energy consumption are obtained. Transport demand-based energy efficiency methods are also developed. The fuel prices (FP) are analyzed under two scenarios: Linear and exponential price scenarios. Results showed that if the FP increases linearly, the marginal cost will slightly decreases from current trend, but will increases if demand increases exponentially. Results also showed that the demand-based pricing policy would help to develop a new pricing policy for fuel use in order to control fast growing demand on this sector. The exponential price increase would also help to locate financial sources to create environmentally friendly transportation systems.     

The role of information in retail gasoline price dispersion

Collecting information on prices is a costly endeavor. The cost depends on the relative ease with which those prices can be collected, and in many retail gasoline markets, there is a substantial divide in the ease of collecting information with regular grade gasoline on one side of the divide and midgrade and premium grade gasoline on the other. Regular grade prices are prominently displayed on large signboards in front of gasoline stations while the prices of higher octane grades, except where required by law, are rarely displayed. In this article, the effects of differential-by-grade price information on search and gasoline price dispersion are examined. A rank reversal test is used to test whether the observed grade-specific price dispersion is consistent with search or non-search related causes and, finding the former, a series of tests are presented to test for the effect of price information and other leading hypotheses. A significantly concave curvature in the price dispersion coefficients across the three grades supports a price information hypothesis. Detailed socioeconomic data on consumers, spatially matched to the stations they are most likely to patronize, shows that income is a secondary factor. Implications for policy are discussed.     

From oil to consumer energy prices: How much asymmetry along the way?

A longstanding question in macroeconomics is whether fuel prices react more to increases than to decreases of the price of oil. This paper analyzes the response of weekly gasoline and gasoil prices to oil prices in the U.S., the euro area and the four largest euro area countries (Germany, France, Italy and Spain) using nonlinear impulse response functions and forecast accuracy tests. While for the U.S. both approaches point to the presence of asymmetries in the adjustment of retail prices, for the euro area the evidence is mixed.     

Price ceilings as focal points to reach price uniformity: Evidence from a Chinese gasoline market

This paper studies the price uniformity in the Chinese gasoline market, using station-level data of Hohhot city, Inner Mongolia. We first document that the mode prices of the gasoline stations are consistent with the price ceilings set by the government, implying that the price ceiling regulation in the Chinese gasoline market may serve as a focal point for the gasoline stations to reach price uniformity. We corroborate the focal point hypothesis by providing evidence showing that some stations would “jump” to the ceilings as their prices approach the ceilings. Also, we find that local market structure, distance between stations, station capacity, market characteristics, and past pricing behavior could affect the probability of gas stations to price at the ceilings. Moreover, a higher price ceiling would reduce the probability that stations reach price uniformity. Our results provide another piece of evidence to the literature regarding the unintended effect of price ceiling regulation.