Accorting to QuoteEthanol.com (http://www.quoteethanol.com/), the Chicago Board of Trade price for a gallon of straight ethanol today is $1.965. To make E85, roughly one gallon of gasoline ($3.75 in my area) is mixed with seven gallons of ethanol. For some fuzzy math:
(1 gallon gasoline X $3.75 per gallon) + (7 gallons ethanol X $1.965 per gallon) = $17.505
This makes roughly eight gallons of E85, so then: ($17.505 / 8 gallons) = $2.188 per gallon
The current price of E85 at the local Meijer Station is $3.45 per gallon. Twenty cents in Michigan taxes are applied to each gallon, and nineteen cents of federal gas taxes are applied as well, so the gas station is getting roughly $3.06 per gallon of E85.
That is a $0.87 difference - does it really cost that much per gallon to manufacture and transport? Michigan is a midwest state, right? We do grow lots of corn here - and heck, we're right next to Indiana for crying out loud.
The question at hand is this: are gas station owners pegging the price of E85 to gasoline, making it just low enough to seem cheaper so that people will buy it? People aren't dumb - anyone who runs E85 knows that you don't get the same gas mileage, rather you end up with 10-30% less. You get the, "Wow honey, I have to fill up all the time running that E85 crap!"
Also, what does this do to the market for E85? If government subsidizes ethanol production and projects to make it cheaper, then the gas station owners are lining their pockets with the difference? In essence, it ends up being taxpayers lining the pockets of gas station owners.
If they are fixing the price just below unleaded, all they are doing is stifling demand for E85, essentially ruining a good opportunity for the market to make a change. If E85 isn't priced consistently 15-30% below regular gas, consumers know that running gas saves them more money in the long run (comes down to the almighty dollar), and they won't switch to E85.
I hope this isn't the case, and I like to give people the benefit of the doubt. Time will tell if E85 is around to stay...
3 comments:
You are on the right track about Meijer but a bit off on your base #'s. Rework it with the following real world #'s for tomorrow 5/6;
($2.45 ethanol-.51 blender credit)x .85
plus $3.60 NL x .15
plus 0.184 federal tax
plus Mich tax
plus 3 cents freight est.
= cost to station.
Yes- Meijer is out of line
Alcohol
Alcohol,
Thank you very much for your informative comment regarding the price of E85. I know that gas station owners have to recoup the costs of implementing E85 - but where does one draw the line?
Thanks again!
Sorry- when I gave the NL price i included tax- use your new formula but these new #'s for tomorrow;
Ethanol- plant gate $2.47
NL - oil rack $3.112 (conventional clear gas)
These new #'s will work out to about $2.55 with tax and freight- the last time we double taxed the NL. The difference would have been even greater using costs from the last time because NL is up 10 cents.
You are lucky to have only 20 cents Mich tax- Wisconsin is .329 yet I only pay $2.699 retail. Meijer bless their little hearts- were good to bring you a new product but they need competition or need to learn how to buy.
Regards- Alcohol
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