Monday, June 24, 2019
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Interest in E85 increases as prices drop
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E85 is selling for 55 cents less than gasoline at the Pump 'N Pak in Luverne. (MPR Photo/Mark Steil)
Ethanol producers see opportunity in the current siege of high gas prices. They're selling 85 percent ethanol far below the price of gasoline, as much as 80 cents a gallon cheaper. The move has increased sales, though the fuel known as E85 is still a small part of the overall market.

Luverne, Minn. — The price sign at the Pump 'N Pak convenience store in Luverne in southwest Minnesota grabs the eye. Regular gasoline sells for $2.09 a gallon. In fact all the fuels listed are over $2 a gallon except one. Manager Lila Sudenga says E85 is $1.54 a gallon.

"Soon as that gas price hit over $2 a gallon people were looking for a more affordable way to get back and forth to work," says Sudenga. "We had it priced at anywhere from 50 to 60 cents lower than super unleaded. And our sales really increased."

E85 sales have tripled since the station lowered its price last month. E85 has always been priced below gasoline, partly because it delivers fewer miles per gallon. Studies show as much as 10-15 percent less. Sudenga says the price gap has widened as gasoline prices have increased.

"When people pull up to that pump, if they don't realize it's E85 and they see that price difference, they definitely come in and ask what's going on," Sudenga says.

That can take some explaining.

What's going on is everything from world politics to the price of corn. All of it affects Pump 'N Pak's E85 price. But most customers just want to know if they can use it. They can if they own what's known as a "flex fuel" vehicle, like the Ford Taurus or Chevy Silverado, though they should check their owner's manual to make sure Flex fuel vehicles can burn everything from straight gas to 85 percent ethanol. Tamara Johnson of Fairmont stopped at the Luverne station to buy E85.

"I do try to use it regularly," says Johnson. "I guess the biggest problem I've found is availability. There's just one gas station in Fairmont that carries E85. But I do try to use it if I'm on the interstate or anywhere that has it."

About 120 stations in Minnesota sell the fuel. Chippewa Valley Ethanol in Benson supplies E85 to about a third of the stations. General Manager Bill Lee says for many consumers corn based ethanol looks better and better when compared to the economic and political uncertainties of escalating oil prices.

"More renewable energy for this country is got to be a good thing," says Lee.

The low price of E85 is a promotional tool for the ethanol industry, but it's also a reality check.

Wholesale ethanol prices have dropped nearly 30 percent since last fall. That means E85 stations can lower pump prices and still make money. Falling prices though means lower profits for ethanol producers. Bill Lee says the decline is mostly because of a perception in the marketplace that the U.S. is producing more ethanol than it can use. He says that's not true, and believes the price of raw ethanol will rise.

"I'm concerned about the short term obviously, but I think our particular company we're going to be strong enough to get through this rough patch and I think a lot of the industry is," says Lee.

Increased sales of ethanol would help, and that's part of the strategy behind reducing E85 prices. It's also a way to bite into the oil industry's share of the market. Ethanol and petroleum interests have waged a bitter campaign against each other for years. It's King Corn versus Big Oil. One sore spot is government subsidies for ethanol. John Hofland is Minnesota Communications Manager for Flint Hills Resources, which owns the Pine Bend Refinery in Rosemount.

"The concern is, what role is the subsidy playing in artificially dropping the price," says Hofland. "We just prefer competitive and marketplace reasons for a certain price being what it is."

Ethanol supporters say the oil industry too receives plenty of government help, mainly in the form of tax breaks. The constant sniping between the two sides has mostly been out of the public eye. The push by the ethanol industry to increase market share for E85 is a very visible part of the fight. Just check the price sign at the nearest E85 outlet.

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