Biofuels vs Hybrids vs Plug-ins vs Gasoline: who’s the cost winner?

Have low gas prices changed the equation for drivers looking to reduce pain at the pump? Who’s the best on cost?

And, is there surprising news on emissions?

We wrote in November 2013 that “times are hard and nobody ought to be spending any dollars at the pump that can be saved by buying smart,” and at the time pointed out the effectiveness of choosing E85 ethanol blends, when it came to stretching the family dollar.

As the world knows, since then oil prices have collapsed. Though now recovering, crude oil prices remain at less than 50 percent of the summer 2014 high point.

So, what does that mean for consumers? What’s the best way to maximize your transportation dollar?

We looked at a couple of good data sources — spot wholesale fuel prices and new car MSRPs as reported by the US government, same-station gasoline (E0), E10 and E85 prices from the esteemed E85prices.com, and wholesale E85 prices as reported by the Iowa Renewable Fuels Association.

Just for fun, we compared the cost over 5 years and 60,000 miles (excluding maintenance) for a Nissan Leaf all-electric, a Toyota Prius running E10, a Chevrolet Cruze running either E85 or pure unleaded gasoline (E0). We picked the Prius and Cruze as they are same-class 4-door sedans.

(Note that electric motor maintenance costs are likely to be less than for ICU engines — so keep that in mind with the comparative costs)

The wholesale fuel prices

Today, gasoline is cheap. Wholesaling at $1.67 , it’s a fraction of what it was a year ago, and that’s been great news for consumers. Broadly speaking, ethanol prices have roughly kept pace on a wholesale basis — they’re substantially down this year, and ethanol is available wholesale in the spot market for $1.32.

E85 — well, that’s a complex mix. For one, there’s a blend of gasoline and ethanol. But also, gallons of renewable fuel in the US come with RINs attached, and sometimes RINs are “detached” from gallons and sold in the open market (right now, for 70 cents), and the savings can be passed along to the consumer.

So, the wholesale price of E85, which is averaging $0.90 this week according to the IRFA — well, it’s quite a bargain. It’s 23% less than the cost of pure unleaded gasoline on a BTU for BTU basis.

The retail prices

When it comes to the price at the pump, there’s the mark-up for distribution, retailer margin and fuel taxes. So, unleaded (E0) gasoline is retailing at a 36% mark-up at an average of $2.27 and E10 ethanol at a 35% mark-up and $2.21. Great prices, and broadly in line with each other.

E85, again, is an outlier. E85price.com is reporting an average E85 price of $1.72, a 91% markup over the averaged wholesale price as reported by IRFA. Some of that perhaps is that E85 is wholesaling much cheaper in Iowa than elsewhere. But it is really weird.

Now, retail E85 (which averages at around 73% ethanol content) has roughly 76% of the energy content of unleaded gasoline (E0). So, what you are seeing at retail is that the E85 price is being marked up to the same cost per energy unit (also known as cost per BTU). If you’re an E85 fan, you probably think that is monstrously unfair to the cause of renewable fuels, and you may suspect predatory pricing policies at the pump, designed to make renewable fuels economically a bad deadl for consumers.

Cost per mile for ICU engines

As we noted, though E85 should be lower at retail given that it costs up to 23% less at wholesale — retail fuel prices are very comparable when it comes to cost per mile. Pure unleaded gasoline checks in at 8.94 cents per mile — and there’s less than a 1% variance for E10 and E85.

Comparing hybrids, electrics and renewable fuels

When it comes to buying a hybrid or all-electric, the running costs are generally quite a bit lower, mostly because electric motors are more efficient than low-compression ICU engines that run gasoline/ethanol blends.

The offset, however, is in the cost of the vehicle, primarily the high battery costs.

Over 5 years and 60,000 miles, the Prius and Leaf don’t quite catch up on cost. The Cruze running retail E85, or E0 gasoline, beats the Prius by $5600 or 21%, and knocks out the Leaf by $9500 or 31%.

The all-electric remains problamtic on range. The Leaf is clocking in at 75 miles per change beased on the latest EPA method. All the ICU engines, hybrid, flex-fuel or conventional, do way, way better.

Now, the federal government offers a $7500 subsidy for buying an electric car — so you may wish to put this in the mix though it doesn’t change the outcome, just narrows the spread. And how long that subsidy is available, that’s a good question. E85 at wholesale is policy-advantaged by passing through RIN savings, but that’s pocketed in the supply chain and the retail customer is seeing an unsubsidized price.

Looking at greenhouse gas emissions

Again, you may find yourself surprised when it comes to greenhouse gas emissions.

Prius running E10, or a Cruze running E85, which is better on greenhouse gas emissions? If you guessed “Prius”, guess again.

Even running on the least-advantaged renewable fuel molecule (corn ethanol, based on the US average of 35% no-till farming, and natural gas as an energy source), a Cruze running E85 checks in at 39.85 pounds of CO2 emitted per 75 miles of driving — that’s the equivalent distance as one full charge of a Nissan Leaf, which would generate 34.96 pounds of CO2 based on the current US mix of power generation.

Both of those beat out the Prius running E10, which checks in at 40.99 pounds of Co2 per 75 mile drive, or pure unleaded gasoline which has a whopping 52.97 pounds per drive.

(The data sources here are: for the “well-to-wheel” emissions comparison, the Natural Resources Defense Council; and the US Energy Information Administration for the power gen mix).

Things that might change in the future

Technology, commodity prices and policies are sure to change. Here are some possible factors that might dramatically change this comparison in the future.

1. Fuel prices may recover. In fact, crude oil prices are expected to rebound something like 40% to around $75 per barrel by 2016.

2. Battery costs may come down for electrics. Technologists are woeking hard on lithium-air batteries. Range may improve.

3. New technologies like high-compression ICU engines or fuel cell vehicles may break through. The high-compression ICU, running an E30 ethanol blend, could achieve diesel-like fuel economy in the high 40s or even low 50 miles per gallon range for small sedans.

4. Carbon policies may change. The Renewable Fuel Standard may alter in ways that change ethanol pricing, or tax credits may wither for electric cars.

5. Natural gas prices may rise relative to oil. Wholesale commodities on the pwoer-side have beenm price-advantaged over fuels for some time, because of fracking technology and a rie in natgas production. That gap may narrow – especially if natural gas is exported to Asia where it commends more than double the US price.

6. It remains to be seen if enterprising retailers see an opportunity to narrow the spread between E85 wholesale and retail. If E85 were retaling at $0.58 above the lowest available wholesale price ($0.70 per gallon from The Andersons), we’d be seeing retail prices of $1.28 per gallon, or 7.7 cents per mile.

7. The US power generation mix is changing, and the less coal fired power, the better for all-electrics. By shifting 20% of US generation from coal to natural gas, the emissions per 75 mile drive of a Leaf drop to 30.18 pounds of CO2 per 75 mile charge.

8. Cellulosic fuels change outcomes for E10 and E85, as well. With a cellulosic ethanol, the Prius emissions drop to 39.03 pounds of CO2 per 75 miles. The Cruze running E85 becomes the undisputed carbon reducing champ, giving up 21.33 pounds per 75 miles, or more than 40% better than the Leaf.

The bottom line

If you like domestic US car makes and domestic fuels, you’re in luck. You can do something for the US economy, carbon, and the family bottom line right now, by simply keeping on with the traditional ICU technology.

One other thing. Avoid falling for the idea that tailpipe emissions are the same as overall emissions. All electrics have emissions today because they use power generated from fossil fuels, even if the emissions are slightly hidden from your view.

If you think for a minute that you’re driving a “clean car” just because you’re not seeing any smoke coming out of a tailpipe, remember all the emissions coming out of a power plant. Like garbage rotting in a landfill, you may not see it, but the problem’s still there. That’s something that only power generated from biomass, solar, wind, hydro or nuclear can ultimately remedy, though natural gas can help transitionally.