Energy Security Role of Biofuels in Evolving Liquid Fuel Markets

Maxwell Brown, Rocio Uria-Martinez, Paul Leiby

Research output: Contribution to journalArticlepeer-review

14 Scopus Citations

Abstract

We explore the role of biofuels in mitigating the negative impacts of oil supply shocks on fuel markets under a range of oil price trajectories and biofuel blending mandate levels. Using a partial equilibrium model of US biofuels production and petroleum fuels trade, we discuss the adjustments in light-duty vehicle fuel mix, fuel prices, and renewable identification number (RIN) prices following each shock as well as the distribution of shock costs across market participants. Ethanol is used as both a complement (blend component in E10) and a substitute (in E15 and E85 blends) to gasoline. Results show that, during oil supply shocks, the role of ethanol as a substitute dominates and allows some mitigation of the shock. As US petroleum imports decrease with growing US oil production, the net economic welfare effect of sudden oil price changes and the energy security role of biofuels becomes less clear than it has been in the past. Although fuel consumers lose when oil price increases due to an external shock, domestic fuel producers gain. In some cases, depending on import share and supply and demand elasticities, we show that the gain to producers could more than offset consumer losses. However, in most cases evaluated here, sudden oil-price increases remain costly.

Original languageAmerican English
Pages (from-to)802-814
Number of pages13
JournalBiofuels, Bioproducts and Biorefining
Volume12
Issue number5
DOIs
StatePublished - 2018

Bibliographical note

Publisher Copyright:
© 2018 Society of Chemical Industry and John Wiley & Sons, Ltd

NREL Publication Number

  • NREL/JA-6A20-71798

Keywords

  • biofuels
  • energy security
  • oil supply shocks

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