Relief at the Pump for Drivers? E85 makes a Comeback

May 28, 2013 |

propel-e85A new E85 pricing scheme from Absolute Energy offers $0.11 savings per gallon vs. unleaded, up to $0.43 savings vs. premium.

And, yes, that’s adjusted for energy density.

Will E85 rise again as spring gasoline prices soar?

“April is the cruellest month”, wrote T.S. Eliot to kick off The Waste Land, and he must have been thinking about gasoline costs.

Each spring, as oil refineries cut back on output in order to get ready to make summer blends of gasoline, the price of gas rises. According to the National Association of Convenience Stores – the annual jump is 27% between February and May.

All of which should point attention to a remarkable effort by Absolute Energy, now offering E85 directly to retailers at $1.93 per gallon.

Gasoline vs E85 – which is more affordable?

Now – why is that significant? With RBOB gasoline selling (wholesale) at $2.84 per gallon, according to CME group, for the July contract, the break-even between E85 and straight gasoline, based on energy density, is at $2.04.

Meaning that, assuming that retailers mark-up the fuels equally, Absolute Energy E85 customers will score a better deal than buyers of E10 or straight (E0) gasoline.

Overall, it’s a savings of 11 cents per gallon (in true energy density terms) for straight unleaded gasoline compared to E85. For cars that require premium gasoline – for which E85 is a perfectly acceptable substitute as it provides 100 octane fuel – the savings will be, on average, some 32 cents per gallon higher (according to AAA’s latest fuel price report).

“By offering higher blends like E85 directly to retailers, Iowa ethanol plants are passing along the RIN savings and hoping that retailers will reflect the lower wholesale prices at the pump,” said Iowa Renewable Fuels Association Executive Director Monte Shaw.

For a long time, blenders of ethanol have been eligible for a special credit generated under the Renewable Fuel Standard – which regular Digest readers will recognize as a “RIN”. The value of this RIN could be pocketed or passed along to the consumer in the form of a discount for renewable fuel.

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