Wemeasure the economic effects of the U.S.EPAethanol mandate on the pricing of ethanol vis-à-vis gasoline blendstock(BOB) and the associated impact on the retail price of blended gasoline.We find that the mandate allows blenders to cut gasoline with lower valued ethanol without lowering the price of the blended product.These effects are modeled by using a programming approach to estimate the gasoline refiners demand for ethanol for blending purposes.In addition,we use regression analysis to measure the impact of increased blending on gasoline prices.We conclude that refiners/blenders are willing to bid up the price of ethanol above its energy content value in order to capture some of the blending profit ensured by the mandate.The pricing of blended ethanol on a volumetric basis is endogenous to the ethanol mandate and it costs U.S.motorists an estimated 7 to 11 cents per gallon.