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Drivers want more consistent E85 prices

Posted: June 2, 2008 at 10:32 AM CST

Update: 6/10/08

Since originally posting this blog about E85 prices a week ago, the national average price of regular unleaded gasoline topped $4 per gallon and the Ethanol Promotion and Information Council released the results of a survey that indicates that nearly half of all Americans are near the "break point" with fossil fuels. EPIC surveyed more than 1,000 people, 47 percent of which stated that a fuel price below $5 a gallon should be the point where fossil fuels are no longer our primary fuel sources. An additional 27 percent of those polled reported that the critical price point lies between $5 and $5.99.

The bottom line: American drivers are getting close to that proverbial point where they either start driving less or seek out transportation – or transportation fuel – options. With gas prices expected to hit $4.50 per gallon (projected nationwide average) this summer, drivers with flexible fuel vehicles will likely turn to E85 like never before. Now, more than ever, it is vital that E85 be priced relative to the value of its ethanol and gasoline makeup. When and where it is, consumers will realize – and truly benefit from – the stark price difference between regular gas and E85. By my simple calculations, with ethanol selling for roughly $2.40 a gallon and gasoline selling for $4.50 a gallon, retailers could potentially sell E85 for $2.75 a gallon, giving drivers a nearly 40 percent price discount over gasoline. Will it happen? Can it happen? We’ll see. If it does, it could be another pivotal moment for biofuels.


Last week, I received an e-mail from a reader who was frustrated with drastic differences in E85 prices in Illinois. He said:

“I am writing this to anyone that can shed some light as to why E85 prices range from $2.95 to $3.83 here in west central Illinois with regular unleaded gas ranging from $3.93 to $4.09. We traveled from Quincy (Ill.) to Springfield (Ill.) on Saturday, May 24, and took notice of $2.99 per gallon E85 in Meredosia, $3.09 in Jacksonville, $3.54 at Meijer (southwest of Springfield), then filled our 2006 Mercury in Virginia (Ill.) with $2.95 per gallon E85. Needed to fuel again today (May 29) and did so here in Quincy at $3.83 per gallon.”

According to the Web site www.E85prices.com, the price of E85 varies a great deal, not only from state to state, but from town to town and station to station. In fact, in Illinois over the Memorial Day weekend, E85 was selling for as high as 3.89 (in Quincy) and $3.83 (in Skokie) to 2.59 (in Princeton) and $2.69 (in Peoria). So, yes, our reader’s frustration is justified. Here we have a willing customer who is doing all he can to fill up with E85, yet paying almost 90 cents more per gallon from one station to the next … in the same state. What’s the deal? Surely we see price differences with retail regular unleaded gasoline prices, but that’s usually no more than 10 to 12 cents in a given region. Why is there such a huge disparity in the price of E85 from town to town in Illinois and other states that have ample supplies of ethanol? Honestly, I don’t know.

Ethanol spot prices in Chicago have been in the 2.45 range. CBOT Denatured Fuel Ethanol Prices were at about $2.40 a gallon last week. On the other hand, the average U.S. retail price of regular unleaded gasoline was more than $3.93 last week. Chicago was averaging over $4 a gallon, while other parts of Illinois were just below that. That tells me that E85 should be selling for about $2.65 to $2.75 a gallon in most parts of Illinois, assuming supply and demand is relatively constant.

I’m certainly not a fuel markets expert, so I’d like to take some time to investigate this issue over the next few days. If you’re able to help us explain why the price of E85 isn’t always priced as attractively (and consistently) as we wished it was, please post a comment or personally e-mail me at tbryan@bbibiofuels.com.

-Tom Bryan