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THE IMPACT OF INCREASING USE OF BIOFUEL ON GASOLINE PRICES

Background and Context

The prices of oil and gasoline in the world market are not always as stable as countries importing these commodities hope it to be . There are instances when the prices would just go as high as possible that it becomes difficult for importing countries to adjust to such increase Aside from this , the use of gasoline in vehicles has proven to be a potential danger to the environment as exemplified by past researches Newton (2003 ) mentions that biofuels are

clean-burning alternatives to gasoline and diesel and are produced from domestic and renewable sources . These are alternative fuels that are simple to use , non-toxic biodegradable and free of sulfur and aromatics , in essence

At present , not all countries are into using biofuels yet . Brazil is noted to be the country which has considered the use of biofuels for quite a time now . In fact , Eisberg (2005 ) relates that Brazil can claim to be the country where the idea of utilizing biofuels as alternatives to gasoline and diesel originated . The said country invested in its 30-year national program to develop substitutes for crude oil products Approximately 50 percent of the vehicles in the country are already operating on 50 percent pure ethanol . As of 2005 , more than 18 .9 bn L of ethanol is produced every year and is believed to increase 4 times as much by 2015 . Hence , Brazil is considered to be the leading producer of bioethanol with approximately 400 plants operating as of 2005

The European Commission (2006 ) conducted a survey in 2004 that showcased various countries who already have invested in biofuels anytime within the years 1992 to 2004 . These countries are Belgium Canada , the Czech Republic , Finland , France , Germany , Ireland , Italy Korea , Luxembourg , Poland , Slovakia , Spain , Sweden , Switzerland , the United Kingdom and the United States of America . Results of the survey showed that in 1992 , out of the 17 countries mentioned , only France and Germany were found to engage in the use of biofuels . However , come 2004 , 11 out of the 17 seventeen countries were already utilizing biofuels . Hence , there is evidence to indicate that gradually , these countries have substituted pure gasoline with biofuel . In fact , Truini (2005 ) revealed that higher prices of diesel and gasoline caused the tide to turn so that the use of alternative fuels became more attractive and so are their prices . Because of the growing number of countries considering the use of alternative fuels , this study came into being The increasing use of biofuels in replacement of pure gasoline has an economic impact on the demand for gasoline which in turn will affect the prices of the commodity

The conduct of this study is imperative because this will determine the behavior of the relationship existing between amount of alternative fuels being utilized and the price of pure gasoline as being used by vehicles as well as the extent of the association between these two variates . This result is important...