Publications: Reference

The PKVerleger LLC But-For Model


In order to assess the impact of the renewable fuel standard (RFS) program on consumer gasoline prices, we construct a model of global crude oil prices. Ethanol use in the U.S. has removed a substantial portion of crude oil demand from the world market, which, under the tight supply environment over the past several years, has produced a material reduction in price. The model calculates the Dated Brent (DB) oil prices that would have prevailed “but-for” the RFS program using an econometric approach that relates changes in DB prices to changes in inventories and seasonal variables. The PDF attached provides the details.