Forest Biomass Fuels and Energy Price Stability: Policy Implications for U.S. Gasoline and Diesel Markets

Abstract

U.S. gasoline and diesel prices are often volatile, driven by geopolitical risks and disruptions in the fossil fuel market. Forest biomass fuels, particularly renewable diesel derived from logging residues, offer a low-carbon alternative with the potential to stabilize fuel prices. This study evaluates whether biomass can moderate fuel price volatility using ANOVA, Tukey post hoc tests, and quadratic regression based on monthly data for biomass production, inventories, and retail fuel prices. Findings reveal the existence of a significant nonlinear relationship between forest biomass inventory levels and fossil fuel prices. Average gasoline prices peaked in the medium-inventory group (M = 0.837) and dropped in the high-inventory group (M = 0.684). Diesel prices followed a similar pattern, with the highest values in the medium-inventory group (M = 0.963) and the lowest in the high-inventory group (M = 0.759). One-way ANOVA results were statistically significant for both gasoline (F(2, 99) = 7.39, p = 0.001) and diesel (F(2, 99) = 7.22, p = 0.0012). Tukey tests confirmed that diesel prices fell significantly from both medium to high and low to high-inventory levels. This result remains robust when using the biomass index level and the biomass production level. These results indicate a threshold effect: only at higher biomass inventories do fossil fuel prices decline, suggesting a potential for substitution. However, current policies inadequately support biomass integration, highlighting the need for targeted reforms.