The American Petroleum Institute (API) retained MathPro Inc. to assess the technical and economic effects of proposed national ethanol mandates, involving ethanol volumes of 30–35 billion gallons per year (bgy), which corresponds to about 20 vol% of the projected volume of gasoline consumption in 2020. Consuming this volume of ethanol use would require either national use of E20 (20% ethanol/80% gasoline) or national use of two fuels in combination: E10 and E85.

The analysis represented the U.S. refining sector maintaining its baseline (i.e., projected business-as-usual) output – in volumetric terms – of the hydrocarbon components of gasoline (i.e., RBOB and CBOB) in the face of increasing ethanol use. The additional ethanol volumes therefore displace imports of gasoline (including RBOB) on an energy-equivalent basis, with no significant change in U.S. refinery crude runs and gasoline out-turns.

The analysis produced the following results and findings:

• National Cost. The national cost of gasoline supply would increase by about $49–58 billion/year with a National E20 mandate, and $52–62 billion/year with a National E10/E85 mandate.
  
  These costs would be borne in some combination by the refining sector (through lower margins), consumers (through higher gasoline prices), and taxpayers (through subsidies and other payments for ethanol production).


• Fossil Energy Savings. U.S. fossil energy use would decrease by about 610 K coeb/day with National E20 and 540 K coeb/day with National E10/E85 (where coeb means crude oil equivalent barrel, the average energy content of a barrel of crude oil). The reductions in fossil energy use would be reflected in corresponding reductions in U.S. imports of fossil fuels, primarily gasoline. The reduction in energy use achieved with National E20 would amount to about 3½% of net U.S. imports of crude oil, petroleum products, and natural gas in 2020 (as projected by the U.S. Department of Energy).


• Cost of Fossil Energy and Import Savings. The fossil energy savings would cost $220–$260/coeb for National E20 and $260–$310/coeb for National E10/E85, over and above the price of crude oil.
  Fossil energy savings from increased ethanol use are expensive because (1) ethanol is costly to produce, (2) a gallon of ethanol has only 2/3 the energy content of a gallon of gasoline, and (3) ethanol production uses a significant amount of energy obtained from fossil fuels.


• E20 Mandates. A national E20 mandate would require an essentially complete turnover of the car and LDT fleets, so that essentially all cars and LDTs on the road would be FFVs. It would also require that all off-road engines be capable of using E20. During the period of transition, the U.S. refining and distribution system would have to supply both E10 and E20 nation-wide, which could cause operating problems and impose significant costs.


• E85 Mandates. Implementing an E85 mandate would require large numbers of E85-capable flexible fuel vehicles (FFVs), with essentially all new vehicles sold in the U.S. being FFVs by 2020; large numbers of service stations nationwide retrofitted to handle E85; and complex regulatory mechanisms to induce consumers to use E85, because E85 has lower fuel economy, and hence lower value to consumers, than E10.


• Cellulosic Ethanol Production. The economic and technical feasibility of large-scale cellulosic ethanol production has not been established. No cellulosic ethanol has been produced in sustained, commercial-scale operations. No commercial-scale (» 50–60 MM gal/yr) cellulosic ethanol plants are in operation or under construction. No established markets or infrastructure exist for acquiring, assembling, transporting, and handling the required volumes of biomass feedstock. Cellulosic ethanol production is inherently more difficult, more complex, and more capital intensive than corn ethanol production. Hence, even after its feasibility is established, cellulosic ethanol – regardless of the biomass feed material of choice – likely will be more costly than corn ethanol.