GoodFuels

Consumer Group Refutes Texas Claim

The Consumer Federation of America calls the argument by Texas Governor Rick Perry that cutting ethanol production will lower gasoline prices “strange.” I call that an understatement.

The CFA submitted comments to EPA today in advance of the decision coming down this afternoon on the request by Gov. Perry to cut the RFS by half.

The comments were filed in response to a study prepared for the state of Texas by Phillip K. Verleger and Darrel B. Chodorow who erroneously claim increasing demand for gasoline and crude oil would lower prices.

“The suggestion that increasing demand will lower oil and gasoline prices is not only contrary to Economics 101 and what independent analyses by Wall Street firms, government agencies, and academic institutions have concluded,” said Dr. Mark Cooper, CFA’s Director of Research, “but the study’s authors do not provide one shred of evidence to support their strange argument.”

In fact, CFA says cutting ethanol production as requested would increase gas prices by almost 50 cents a gallon.

“We looked at the movement of refinery output, imports, exports and inventories, as well as recent price changes and could find no evidence that the market is or would behave in the bizarre, counterintuitive way that the Texas theory predicts,” Cooper concluded. “It is critical that the EPA base its decision on the waiver request on a proper understanding of how current energy markets work in the real world.”