Browsing by Subject "gasoline"
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Item Open Access Evaluating the Economics of Ethanol(2008-12-05T18:29:07Z) Bean, PatrickThe ethanol industry has experienced explosive growth in the past several years due to concerns about oil dependence and climate change. However, sentiment has begun to shift against corn ethanol due to increasing food costs, dwindling profit margins and increased government expenditures propping up the industry. Despite the record increase in gasoline prices, ethanol has struggled with its own rising costs of production and market turmoil. This Masters Project assesses the economics of corn-based ethanol production in the United States through the development of three models. The Ethanol Supply Curve Model constructs an ethanol supply curve based on user defined commodity prices. The model compares the marginal cost of ethanol production to the wholesale price of gasoline in order to determine the ability of ethanol to compete with gasoline in the transportation fuel market. The Ethanol Profit Model solves for a facility’s profit margin under user defined commodity conditions. The Ethanol Variable Subsidy Model calculates the price-contingent subsidy required for ethanol to compete with gasoline on a price basis. A reference case is developed using commodity prices from U.S. government forecasts for 2008. Additionally, several sensitivity analyses are completed to provide insight about the potential health of the ethanol industry under different conditions. The results from the reference case indicate the ethanol industry is facing a treacherous production environment. The reference case scenario finds profit margins of $-0.1116/gallon for dry-mill ethanol producers, and $0.0498/gallon for wet-mill producers. Ethanol producers face the risk of bankruptcy, consolidation and failure to meet government production mandates if the current conditions persist. In the reference case, ethanol producers require a 33% increase in the ethanol subsidy from $0.51/gallon to $0.6796/gallon in order to break-even with gasoline prices. The Ethanol Supply Curve Model also shows that the market currently values ethanol on a gasoline-energy equivalent basis rather than a volumetric basis. Model instructions and computer code are included in the report.Item Open Access Plug-in Hybrid Vehicles: Impacts on the retail fuel sector(2008-04-24T18:31:56Z) Eyler, ZachCurrently, several automakers are planning the introduction of plug-in hybrid vehicles (PHEVs) to the U.S. market with estimated arrival around 2010. PHEVs operate using a combination of gasoline and batteries and allow drivers the ability to re-charge their vehicles at a home. This change in fueling behavior would decrease the amount of petroleum fuel needed for transportation with any impact first being felt at the point where the fuel is actually dispensed: the gasoline station. This Masters Project aimed to determine effects on gasoline stations from a decrease in petroleum demand due to PHEVs. An economic snapshot of the retail fuel sector was created to determine the state of the industry and determine any trends in the sector. In addition, a financial snapshot of gasoline stations was derived using past data to determine revenue streams, both fuel and non-fuel, and the associated profit margins with those revenues. Four future market penetration scenarios for PHEVs (No, Low, Medium, High) were created and analyzed for future fuel demand using the VISION model. The resulting fuel consumption was applied to gasoline stations to determine any revenue impacts. The results indicated that gasoline stations derive the majority of their revenue from fuel sales, and have been increasing over time. In contrast, non-fuel revenue has actually decreased slightly over time. In terms of profits, gasoline stations derive the majority of their earnings from non-fuel revenue compared to fuel revenue due to much higher average gross margins. The VISION model predicted large impacts to gasoline stations, with PHEVs lowering fuel demand and the associated fuel revenue generated. Due to their historical relationship, non-fuel revenue at gasoline stations was actually predicted to increase as the fuel consumed decreased. For a sector that is already undergoing a significant amount of change and struggling to make profits, PHEVs offer a potential destabilizing threat unless retailers find ways to increase margins and adapt to new vehicle technologies.