It Is About the Money (But Not the Money You Think)

Financial assistance for E15 refueling infrastructure is helpful and important, but the real draw of higher ethanol blends is not up front incentives, but the potential for increased sales, more customers, and better margins at the pump.
By Ron Lamberty | February 08, 2021

Punxsutawney Phil didn’t see his shadow on Groundhog Day in 2020, which, according to legend, meant an early spring. Phil nailed it. Then March came in like a lamb (except in Nashville, where they had several tornadoes) and while the weather was lamb-like at the end of the month, most of the world wasn’t talking about weather. Instead, it was focusing on the rabid COVID-19 lion that entered in mid-March, started tearing things up (like the rare tornadoes in Hawaii at the same time), ate the lamb, and was looking to do more damage. As it did so, the ethanol industry, which had already been gutted by prices driven below cost by a manufactured oil supply glut, was brought to its knees by a sudden 50% drop in worldwide fuel usage.

Yet fuel retailers stayed open, selling the other half of the fuel to those who could still use it, and c-stores became a critical piece of keeping us safe and healthy during the darkest early days of the pandemic. Some chuckled when convenience stores were called “essential services” during the shutdown, but when c-stores were often the only places open for gas, groceries, and in some areas, the only place to get a prepared meal, everyone understood.

Those same convenience stores will now be “essential services” if the ethanol industry is to return to normal, even after we found strengths and markets we didn’t fully appreciate before 2020.

The pandemic showed ethanol’s value as a product to protect public health, and the fact ethanol sales didn’t drop as far or fast as gasoline during the pre-pandemic Russia/Saudi slap fight proved ethanol’s octane has value. And as a new Congress and administration focus on carbon in energy and environmental discussions, we have an opportunity to show elected officials today’s ethanol is “not your old man’s” ethanol. It’s a clean, low-carbon fuel that in many areas can be as clean or cleaner than electric vehicles, if we’re allowed to sell blends with more ethanol and less gasoline.

That’s where convenience stores become so important, especially if liquid fuel volumes decrease as some have predicted. We have to show how ethanol is essential to them. About 95 of 100 vehicles on the road today can use E15, and one in 11 is a flexible-fuel vehicle. Even with extraordinary recent growth in electric vehicles the past few years, one in 165 cars is a plug-in electric, and most of those could plug in at home.

That’s why the most successful E15 and/or flex fuel retailers switched. Yes, money for equipment draws attention, but the bottom line is… the bottom line. There are far more potential new customers driving E15 and flex-fuel vehicles today than any other alternative fuel vehicle, and that will be the case for a long time. Couple that with EPA’s acknowledgement in its proposed E15 labeling and tank compatibility rule that much of the equipment in stations today is compatible with ethanol blends above 10%, and we’ve got a compelling case for retailers, even without free equipment money. EPA even cites ACE’s FlexCheck compatibility tool on flexfuelforward.com to show current infrastructure might already be higher-blend compatible.

Pearson Fuels in San Diego has sold more new gallons of ethanol through retail customers than any marketer in the nation the last several years, while paying a much smaller portion of customers’ equipment costs than our industry typically has. How? Pearson shows retailers E85 makes them money and prospective new retailers keep contacting Pearson for help getting into the E85 business.

Maybe the concept of “teaching someone to fish” is just easier to grasp when you live by an ocean.

 

Author: Ron Lamberty
Senior Vice President
American Coalition for Ethanol
605.334.3381
rlamberty@ethanol.org