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Don’t be fooled by the current gas-price moderation, and be prepared to fill up with E85 when the time is right, experts advise.
The prevailing gas-price trajectory is upward, unlike E85’s more stable trend line. This sets up a cost-benefit scenario that favors E85, say backers of the gasoline-ethanol blend.
The tipping point is somewhere north of $4 for a gallon of regular-grade gas, says Mark Maher, executive director for Powertrain and Vehicle Integration at General Motors. When that inevitability occurs, “I would certainly expect a surge in E85 demand,” he tells Ward’s.
“We need to see about a 20%-25% price differential between gas and E85 in order for E85 to be a good value on an energy basis, and there are many places around the country with that price differential.”
Illinois and New York are two, according to American Automobile Assn. data. In Illinois, where gas recently averaged $4.17 and E85 was $3.44, the spread was 21.2%; and in New York, where the fuels sold last week for $4.13 and $3.40, respectively, the differential was 21.5%.
There are about 10 million E85-compatible vehicles on the nation’s roads, according to the U.S. Department of Agriculture. Yet the fuel is not widely used.
One reason is availability. Of the 140,000 filling stations in the U.S., only 2,700 sell E85.
Underlying this disparity is the value proposition. Because gasoline packs more punch than E85, the cost-benefit of burning the latter is marginal when they are similarly priced.
Historically, there has been a direct correlation between gas-price increases and the advantage of refueling with E85. On July 17, 2008, when the national average per-gallon price of gas price spiked to a record $4.11, E85 retailed for $3.33 a gallon – a 23.4% spread.
This year, to date, the peak price of a gallon of gasoline is $3.98 vs. $3.34 for E85, representing a 19.2% differential.
In Brazil, where sugarcane-derived ethanol is the dominant fuel, GM distributes a cheat sheet for consumers. It “shows you what a good buy is on a given day based on fuel prices,” Maher says.
For example, if gasoline in Brazil is BR1.50 ($0.92) per liter and ethanol is at BR1.00 ($0.61) – a 50% price advantage – the chart recommends ethanol.
The AAA publishes a daily chart that adjusts U.S. average E85 per-gallon prices for energy content, expressed in British Thermal Units. That price always is higher than the price of gasoline.
Last week, AAA’s BTU-adjusted price for E85 was $4.34, compared with $3.91 for gas, indicating the latter currently provides more bang for the buck.
But E85 boosters cry foul when comparisons are made without accounting for variations in purity.
