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Minnesota boasts some pretty awesome E85 prices

A few weeks ago, a reader question sparked an interesting search for answers. That one comment has led to several stories and blogs at our website.
By Holly Jessen | January 12, 2015

In mid-December, a reader asked me why, as opposed to some of the high E85 prices I wrote about in Illinois, in Minnesota, there are some gas stations with great E85 prices. In fact, compared to just over the border in Wisconsin, the prices are downright amazing.

I am curious if you would happen to know how Minnesota can sell E85 for such low prices compared to Wisconsin and other states?” the reader asked. “The VEETC ended in 2011 so there are not any subsidies that I know of creating the price gap. A few stations are selling E85 for less than what the wholesale costs are. As of (12/12), Cenex, 1705 Broadway St., Alexandria, Minnesota, E85 price is $1.37 while E10 gasoline is $2.37. Other prices include: $1.39 and $1.46 and range all the way up to nearly the same cost as gasoline for E85. I am curious because in my hometown across the Minnesota/Wisconsin border by about 15 minutes is selling E85 for $2.35 and $2.45 while E10 gasoline is $2.49 as of 12/12.

With the holidays and some downtime for being sick, I’m now ready to report on what I found. Exactly four weeks after the reader provided me with those prices, I found E85 prices at that same gas station in Alexandria are even lower than in mid-December. As of Jan. 9, the Cenex was selling E85 for 85 cents a gallon, compared to $1.85 for E10, according to Carson Berger, my source at the ethanol plant that supplies that gas station (and 44 others) with E85. Other stations in the same area had E85 priced at 95 cents a gallon and E10 that was $1.95, he said.

I went to e85prices.com for some additional comparison numbers of E85 prices in Wisconsin and Minnesota. Keep in mind that these numbers are the ones listed on Jan. 12, but had been reported to the website at various dates. For Minnesota, for reported prices, on average, E85 was 36.5 percent cheaper than E10. The cheapest E85 was 85 cents (at that station in Alexandria) and the most expensive E85 was $2.39, the same price as E10 at that particular gas station. (It was also the most expensive E10 price listed.)

Let’s compare that to the E85 prices reported for Wisconsin, which ranged from $1.59 to $2.59. (For comparison, the E10 gas price ranged from $1.89 to $2.59.) In this state, the average price spread was only 11 percent.

In fact, according to the website, Minnesota has the most favorable E85 average price spread, with flex-fuel vehicle drivers winning at the gas pump. Other states of note are Texas, with a 24.3 percent average price spread, California, with a 20.7 percent average price spread, Kentucky, with a 17.8 percent average price spread, Illinois, with a 15.9 percent average price spread, and North Dakota, with a 15 percent average price spread. Note more than half the states don’t report E85 prices to this website.  

The state with the worst reported E85 prices is Washington. Of the only three gas stations with reported E85 prices, all three are higher than the E10 price by 32 to 47 percent. The most expensive E85 is $3.51, compared to $2.54 for E10 at that station.

So, after all that, what’s the answer to the original question: how can gas stations in Minnesota offer such attractive E85 prices compared to other gas stations? The short answer is, ethanol plants selling E85 direct to gas station retailers, which creates competition, drives down prices and spurs other retailers to buy E85 direct from the source.

Denco II, a 24 MMgy ethanol plant in Morris, Minnesota, and three other Minnesota ethanol plants sell direct to gas station retailers, according to Berger, the commodities risk manager of DENCO II. I wrote a news story about DENCO II and I plan to write another blog with more details from Berger and Mitch Miller. I previously interviewed Miller for a related story, about E85 prices in Michigan and Carbon Green Bioenergy LLC’s Yellow Hose program.