Advanced Biofuels Canada comments on affordability, energy-security benefits of low-carbon fuels

Advanced Biofuels Canada released a statement by its president, Fred Ghatala, on the stabilizing role of biofuels amidst current global crude-oil supply shocks.

“Surging crude oil and gasoline prices are impacting Canadian drivers and our economy,” Ghatala said. “To the question of whether biofuels in our fuel supply are helping or hurting Canadians in the midst of this conflict, the facts are unequivocal—biofuels are dampening both price increases and price volatility resulting from an unstable geopolitical situation.”

The first reason is simple supply and demand economics.

Restricted crude-oil supplies have driven gasoline pump prices higher.

Prices drop when more gasoline supplies are available.

Canada’s average 10 percent ethanol content in gasoline provides that additional supply for Canada’s cars and light trucks.

Economists call this “price elasticity.”

Without ethanol, pump prices would be substantially higher.

This dynamic has been the subject of expert studies quantifying the fuel-cost benefits of biofuel blending when global fossil-fuel production is disrupted by war or sanctions.

A 2014 study in the Libyan-war era concluded that ethanol blending was suppressing gasoline prices by 25 U.S. cents per gallon, and a 2017 study calculated fuel savings associated with additional ethanol supply to be 22 cents per gallon under relatively quiet geopolitics.

Older studies also show this relationship.

Further, a 2022 expert study assessed the presence of 6 percent biobased diesel content in U.S. diesel volumes to have reduced the cost of diesel by 4 percent, or 22 cents per gallon.

Secondly, ethanol is cheaper than gasoline, and the price spread is growing.

The most recent “Biofuels in Canada” report shows Canadian wholesale ethanol was 7.4 cents per liter cheaper than gasoline.

More critically, the gasoline-ethanol spread is wider now than it has been in years.

Ethanol-blended gasoline reduced Canadian wholesale gasoline costs by CAD$1.7 billion in 2024.

Since 2010, ethanol has reduced wholesale gasoline costs by over CAD$13.2 billion.

Finally, biofuel and conventional fuel prices have responded asymmetrically to global energy instability.

Since the start of the Iranian conflict, Canadian wholesale gasoline prices have risen by 28 percent, while wholesale ethanol prices have risen 5.5 percent.

Moreover, the cost of feedstock for making gasoline—crude oil—has increased 35 percent, while ethanol feedstock—corn—has risen 2.5 percent, and biobased diesel feedstock—canola oil—has increased 5.8 percent.

Biofuel in gasoline is already saving motorists money and also has lower price volatility relative to global energy instabilities.

“It’s easy, but inaccurate, to suggest that Canadians’ home finances would be stronger without biofuels, but the data do not support that theory,” Ghatala said. “Furthermore, a domestic biofuel industry that utilizes Canadian farm-crop feedstocks insulates us from the instability caused by global-trade tensions by shoring up domestic supply of transportation fuels and lessening reliance on foreign markets and volatile trade policies. Experts estimate that biofuels add at least CAD$6.4 billion every year to the Canadian economy. This figure is rapidly growing as Canadian production of biomass-based diesel has expanded significantly in the past few years. Federal, provincial and territorial governments are actively renewing an industrial strategy for Canada’s fuel supply chains—the economic and energy security benefits of Canadian-made biofuels are a cornerstone on which to build a resilient, secure and affordable Canadian economy.”