Biofuels policy and the US market for motor fuels: Empirical analysis of ethanol splashing

• Low ethanol prices and tax credits have resulted in discretionary blending of ethanol into fuel supplies above required levels. • This has important implications for motor fuels markets and vehicular emissions. • Our analysis incorporates the price of ethanol as well as the blendstock price to model the wholesaler's decision of whether or not to blend additional ethanol into gasoline at any particular wholesale city‐terminal. • The empirical analysis illustrates how ethanol and gasoline prices affect ethanol usage, controlling for fuel attributes and city‐terminal‐specific effects.