Methanol as an alternative fuel: Economic and health effects

Switching from gasoline to methanol fuels has important economic and health effects. Replacing gasoline with methanol will affect oil markets by lowering the demand for oil and thus lowering oil prices. Increased demand for the natural gas feedstock will increase natural gas prices. Because methanol is more costly than gasoline, fuel prices will also increase. On the other hand, methanol use will reduce ozone pollution and some of the health risks associated with gasoline. Considering all three markets affected by the phasing-out of gasoline, the switch to methanol results in net gains. The health benefits from lower pollution and the lives saved from the switch from gasoline to methanol are in addition to these gains. Overall, the benefits of the policy far outweigh the costs. However, the gains in the oil market, arising from the US monopsony power in the world oil market, can be captured by other, more efficient policies. 21 refs., 2 figs., 3 tabs.