California clears sales of higher-ethanol fuel to lower gasoline costs

By Reuters News

By Siddharth Cavale

NEW YORK, Sept 21 (Reuters) - California Governor Gavin Newsom signed legislation allowing the immediate sale of a higher-ethanol fuel blend in the state, as it seeks to rein in skyrocketing costs at the pump in the country's largest auto market.

The signing of Senate Bill 795 on Saturday removed the final regulatory hurdle for the sale of E15, a gasoline blend containing 15% ethanol, more than a year after state Senators unanimously voted to allow the move. California had been the only US state where the fuel could not be sold.

"This common-sense bill cuts unnecessary red tape while maintaining our environmental and safety standards. We're helping make E15 a real option for California drivers," Newsom said in a statement.

The measure is expected to benefit ethanol producers and corn growers by opening the nation's most populous state to the higher blend.

Eric McAfee, chief executive of Cupertino, California-based renewable fuels producer Aemetis, estimated the change could add about 650 million gallons of annual ethanol demand in the state.

"Currently ethanol sells wholesale for about $2.30 a gallon, so it will result in significant cost savings compared with gasoline in California," McAfee said.

Average gasoline prices in California were hovering near record levels of about $6.14 per gallon on Sunday, compared with a national average of $4.44 per gallon, according to GasBuddy data.

California's approval of E15 comes as Congress weighs separate legislation to permit year-round sales of E15 nationwide.

The issue has gained urgency after the US war with Iran rattled global oil markets, pushing up fuel prices and raising concerns about crude supply disruptions. The impact has been particularly acute in California, which already records some of the highest gasoline prices in the United States because of stringent fuel standards, relatively high taxes and its reliance on imported petroleum products.

The Renewable Fuels Association said E15 could lower retail gasoline prices by roughly 20 cents per gallon and save California drivers at least $2.7 billion annually, citing a 2024 study by economists at the University of California, Berkeley, and the US Naval Academy.

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