Abstract

DOMINGUEZ, Juan M. Bio-Fuel Market: Hypothetical Scenarios. rev. econ. Caribe [online]. 2012, n.9, pp.1-41. ISSN 2011-2106.

This paper employs the Ivaldi-Vibes algorithm to model the U.S. fuel market under the hypothetical scenario in which the ethanol production subsidies were phased out from 1995- 2005. Under this hypothetical situation, the individuals were not only willing to switch their consumption decision, but they were also willing to consider alternative modes of transportation including public transportation, biking or walking. As a result, the outside alternative market share increased about 4% and 6% and the conventional fuel market shares increased while the ethanol blends experienced decreases across all petroleum districts.This methodology also permitted simulating the impact of this elimination on the fuel prices. The conventional fuel prices increased in a range between 0.12 and 1.34 percent. Finally, since different types of oxygenates are blended with the regular fuel to compliance the EPA regulations, the reduction in the reformulated gasoline market shares implied a trade off in the demand for these oxygenates whose variation rates averaged 55.14% for the ethanol-MTBE ratio.

Keywords : Biofuels; ethanol; production subsidies; oxygenates; marginal costs.

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