Ethanol helps reduce high gas prices of summer months

By Holly Jessen | May 24, 2013

As drivers head out for trips over Memorial Day weekend, increasing attention is being focused on gasoline prices. In the meantime, ethanol industry advocates are pointing to the power of ethanol, which helps Americans save money at the gas pump.

Currently, the national average for gasoline is $3.68 per gallon for regular unleaded fuel, about the same price as last year at this time, according to In related news, as of close of market May 23, the spread between gas and ethanol future prices was 20 cents, said Rick Kment, a Telvent DTN biofuels analyst. In other words, ethanol is selling at a discount to gasoline.

Gasoline prices in the Midwest, particularly Minnesota, have been noticeably higher recently. In that state, there was an 81 cent increase in average retail regular gas prices between April 15 to May 20, bringing the price to $4.29 as of May 20. “Higher gasoline prices in the Midwest largely reflect supply constraints stemming from decreased refinery runs and lower-than-normal gasoline inventories,” according to a May 23 U.S. Energy Information Administration report. The reasons for the reduction include a combination of routine maintenance, unplanned outages and upgrading projects.

The Renewable Fuels Association pointed to 2012 research which concluded that ethanol reduced the price of wholesale gasoline by an average of $1.09 per gallon in 2011. Regionally, the price impacts ranged from 73 cents a gallon savings in the Gulf Coast to $1.69 cents a gallon in the Midwest. Bob Dinneen, president and CEO of the RFA, also added that E85, which is widely available in the Corn Belt, offers significant savings to flex-fuel drivers. “I suspect owners of flex-fuel vehicles will enjoy their summer driving vacations a bit more than other drivers,” he said.

Growth Energy commented on the seasonal patterns to gas price increases. “Big Oil’s predictability is absurd—every year the same thing happens, as more people hit the road, prices climb,” said Tom Buis, CEO of Growth Energy. “It is just as certain that the sun will set in the evening, as oil companies will use any excuse to gouge consumers and blame some outside factor.”

Higher gas prices are just another reason by biofuels are necessary, he added. “Enough is enough,” he said. “It is time we end this absurd addiction to foreign oil and use homegrown American ethanol.” 

The Iowa Renewable Fuels Association also talked about the savings drivers of FFVs can enjoy.  In Iowa, some retailers are able to offer even greater savings due to ethanol plants selling E85 directly to the retailer. For example, Absolute Energy LLC, a 115 MMgy ethanol plant located near the Iowa-Minnesota border, markets E85 directly to retailers, passing on the value of the renewable identification number (RIN) generated during the blending process. Recently E85 at Iowa terminals was priced at $2.77 a gallon, according to OPIS numbers. On the other hand, Absolute Energy listed the price of its E85 at $1.94 per gallon earlier in the week—a savings of more than 80 cents. “Frankly, I think the ethanol industry is growing tired of sending a gallon of ethanol to a middleman, just to watch them pocket the RIN value, instead of passing the savings on to the consumer,” said Absolute Energy CEO Rick Schwarck. “Here at Absolute Energy, we’ve taken matters into our own hands. We’re cutting out the middleman and showing consumers the real savings that ethanol can provide. As a result, consumers should be seeing even greater savings from ethanol blends.”

The Nebraska Corn Board also talked about the savings that FFV drivers can access by filling up with E85. "Depending on where you're traveling, you can save as much as $1.30 per gallon by filling up with E85," said Don Hutchens, executive director of the Nebraska Corn Board.  "That's a $26 savings on a 20-gallon fill up.  Even with the reduced mileage of E85, it is still economical today for flex fuel vehicles to use E85 and other ethanol blends."  

Prices and locations of E85 pumps can be found online.