Gas price spike may crank up flexible fuel sales
Ethanol supporters are hoping the recent spike in gas prices will prop up demand for the corn-based fuel.
About two years ago during the recession, when ethanol prices moved higher than conventional gas prices, demand for the renewable fuel took a downward turn.
"Some ethanol plants had to shut down production for a time, but that capacity is back up there now," said Dave Loos, research and business development director for the Illinois Corn Growers Association.
On Friday, regular gasoline prices in the Champaign-Urbana area were hovering around $3.50 a gallon, according to AAA's Fuel Gauge Report. A gallon of E85 was about 50 cents less per gallon.
"As gas prices rise, ethanol provides an even better benefit to consumers," Loos said. "Consumers with flexible fuel vehicles that can use higher blends are moving in that direction."
E85, made of 85 percent ethanol and 15 percent gasoline, has been available at all three area Schnucks in Savoy, Champaign and Urbana since 2007, in addition to a handful of other retail outlets in the area. Only flexible fuel vehicles can handle running on E85 fuel.
"We saw that that was the direction fuel centers were going, especially in the central Illinois area," said Schnucks spokesman Paul Simon.
Not all of Schnucks' locations offer E85, but the company decided to install them here in 2007 because it was easier to install the E85 pumps at new stations than retrofit older ones, according to Simon.
E85 fuel "can be more popular with vehicles that do allow for use of E85. Traditionally it is a little more affordable than gasoline, and that price varies as does the price of gasoline on a daily basis," Simon said.
Loos is bullish on E85 because the more vehicles on the road with E85, the more opportunities for E85 dispensers, and the more likely consumers will pull up to the E85 pumps, he said.
"I really do think we'll see a growth in E85 and blender pumps. The big three automakers (Ford, GM, Chrysler) are all committed by model year 2012 to have 50 percent of their vehicle fleet flexible fuel vehicles," Loos said.
Yet consumer demand, at least at some gas stations in central Illinois, has not caught up to the levels seen in early 2008 when gas prices were setting records and more consumers were looking at E85.
The Meyer Oil Co.-owned Mach1 gas stations and convenience stores recently stopped selling E85 in some dispensers, including the pumps at their station at Philo Road and Florida Avenue in Urbana.
"It was due to lack of demand and lack of clarity on labeling," said Allan Meyer.
Back when gas was $4 a gallon, the station would sell about 12,000 gallons a month of E85, Meyer said. Before the Teutopolis-based company decided to switch to regular gasoline, the station was selling about 1,000 to 1,500 gallons of E85 a month.
As for Schnucks, Simon declined to say how many gallons of E85 the stations sell daily or monthly.
Sales numbers are "something we constantly monitor going forward," he said.
"New car sales were slow in '08 and '09 ... and gasoline prices stabilized. Those things worked against (E85) over the last few years. ... Recently car sales are up, gas prices are up due to uncertainty in the Middle East and (E85) usage has likely gone up," said Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association and Illinois Association of Convenience Stores.
The national average price for a gallon of regular gasoline is $3.54 a gallon, up from $3.11 a month ago and $2.77 a year ago, according to the AAA Daily Fuel Gauge Report. The average in Illinois is $3.63. In Champaign-Urbana, the average is $3.55, up from $3.10 a month ago and $2.76 a year ago. Danville is at $3.60, up from $3.17 a month ago and $2.77 a year ago.
For E85, the national average is $2.98, although the miles per gallon and Btu-adjusted price is $3.93, which AAA adjusts to reflect the lower energy content as expressed in British thermal units.
"There's pros and cons (to E85). It is cheaper, but it doesn't get the mileage that E10 (a blend of 10 percent ethanol with 90 percent gasoline) or straight gasoline gets. You have to evaluate whether your 25 percent reduction in gas mileage is beneficial based on the price of gasoline," Fleischli said.
Ethanol blenders currently receive a tax credit, called the volumetric ethanol excise tax credit, or VEETC, which allows for a 45 cent per gallon excise tax credit for each gallon of ethanol used.
Right now, almost every gallon of gas sold in Illinois has 10 percent ethanol in it, Loos said.
"In this state, the ethanol market is pretty well saturated," he said.
However, with the certification from Underwriters Laboratories of some new E85 dispensers, Loos said, he is optimistic that more gas stations will be installing not only E85 dispensers but more blender pumps as well. One day, consumers may be able to choose among blends including 10 percent ethanol, 20 percent ethanol, 50 percent ethanol or E85, he said.
