Why is E85 Almost $2 Cheaper Than Other Blends of Gasoline?

by Tyne Morgan (AgWeb) ... E85 is priced significantly less than other blends of fuel across the country, even $2 below at some locations.

“We’re talking about a 30% to 40% discount in many cases,” says Geoff Cooper of Renewable Fuels Association (RFA). “The reason for that is because the main ingredient in E85 - ethanol - is priced far below gasoline right now. You look at the wholesale terminals where the fuel is blended and ethanol today is selling for about $2.80 a gallon. That compares to gasoline that is selling for about $4.20 a gallon. So you have a $1.40 per gallon savings at the terminal where these fuels are being blended.”

“So, every gallon of ethanol that gets blended comes with an RFS credit that is today worth about $1.50 a gallon," he says. "Some marketers and blenders are passing along some or much of the value of those RIN credits to consumers in the form of these lower prices. So that's why we're seeing E85. priced well below E10. In some places, we're seeing E85 still priced at $2.75 or $2.90 a gallon, which is really getting people's attention when they drive by and see a price under $3 on a marquee.”

So, why are some gas stations offering E85 at such a discount compared to others?

Cooper says in addition to the RIN piece of the puzzle, some of it has to do with certain states offering a tax exemption for E85, which can lead to lower prices at the pump. He says market fundamentals are also at play in many cases.

Cooper says E85 is still a relatively small share of demand, as it’s only approved for use in flex fuel vehicles. According to RFA statistics, the U.S. has 25 million to 26 million flex fuel vehicles on the road, which is one out of every 10 vehicles.

E15, which recently was cleared for use during the summer driving season by the Biden administration, is approved for 97% of vehicles on the road today.

“You have some retailers trying to take more margin. For those that are selling E85 at these higher prices, they're making enormous margin on that product right now,” says Cooper. “In markets where you have more stations selling E85, we tend to see lower prices because there's more competition. ..."

Critics of ethanol say higher blends of ethanol in gasoline is what causes a large reduction in miles per gallon (MPG), which then causes those gasoline options to not see the savings in the end. Cooper says while there is a small reduction in MPG, drivers are still coming out ahead with prices today.

“I drive an F 150 flex fuel vehicle, and I tend to get 12% to 15% lower MPG when I'm using E85,” says Cooper. “But if I'm paying 30% or 40% less for E85, I'm still coming out on top by a by a wide margin. So that's something else that we hear a lot about is the MPG issue. And again, if you look at it on a cost per mile basis, you're saving money when you use E85 and E15." READ MORE

Excerpt from Brownfield Ag News: Minnesota Democrat Angie Craig tells Brownfield a fuel tax “holiday” would save nearly 50 cents a gallon at the pump.

“I fundamentally believe that this Congress should be completely focused on how do we use every tool at our disposal to lower costs for working families.”

Craig points to the war in Ukraine as a major reason for higher fuel prices and she wants to replace every gallon of Russian oil with U.S. biofuels.

“It’s better for the environment, helps us reduce carbon emissions, and it costs less. So I’m going to keep advocating for biofuels, I’m also going to keep advocating that we have about a nine month moratorium on the gas tax, both at the state and the federal level.”

Craig introduced two bills included in the Lower Food and Fuel Costs Act that passed in the House Thursday, the Year-Round Fuel Choice Act and the Strengthening the Agriculture and Food Supply Chain Act. READ MORE; includes AUDIO