Alternative Fuel Price Increases

I was doing some research on E85 flex fuel equipped vehicles tonight and found some interesting information regarding the price of E85 in correlation with the price of gasoline.

E85 fuel is 85 percent ethanol and 15 percent gasoline. With gasoline just making up a percentage of E85, fuel prices should not increase the same amount that gas does.

Tennessee e85 price chart

For example, let’s say that gas is $3.00 per gallon and E85 is $2.70 per gallon. If gas were to go up $.30 to $3.30 per gallon then we shouldn’t see E85 go up the same $.30 per gallon because it’s only 15% gasoline, but in some places this is exactly what is happening on a consistent basis.

At $3.00 per gallon $.30 would be a 10% increase in price. If E85 is 15% gasoline then it should only increase about $.05 per gallon (using $2.70 as the price).

Add to the fact that using E85 will result in a 10-15% decrease in fuel economy. Granted, E85 is a more environmental friendly fuel than gasoline, but it is not as efficient because E85 does not produce as much energy as an equal amount of gasoline. In the long run paying 10% less for E85 could actually be costing the customer more because of the 10-15% loss in fuel economy. At best the customer might break even compared to using traditional gasoline.

How can we expect owners of E85 equipped vehicles to continue to use this alternative fuel when they realize the facts? Yes, some might still use it because it’s better for the environment, but we will never reduce our dependency on oil if alternative fuel prices go up in direct correlation with gas prices.

Excuse Me While I Rant
I know we live in a capitalistic society and oil companies are in business to make money, but I don’t think our government is doing enough to regulate this monopolistic stranglehold that oil companies have on our economy. Yes, they give tax breaks to people who buy alternative fuel vehicles but they are in no way doing enough to make the fuel that powers these vehicles affordable.

Competition is the environment in which true capitalism thrives. This market will never have the competition that it requires to regulate itself if the same oil companies that sell us gasoline are setting prices for alternative fuels.

I am not an economist, just an “average joe”, but our government has in the past taken appropriate steps to bring balance when companies become so monopolistic in a market (ie Microsoft, AT&T). In my opinion alternative fuels will never become viable alternatives until more competition is allowed in this market, and given it’s track record this market is not going to regulate itself.

Sources: E85fuel.com

Posted on February 27, 2008
Filed Under Environment | Leave a comment

Comments

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5 Responses to “Alternative Fuel Price Increases”

  1. Matt Reeves on September 18th, 2008 8:00 pm

    In your research did you find a reason why ethanol prices are increasing so much with gasoline. Like you said they shouldn’t be increasing as much as they are since E85 is only 15% gas.

  2. Trai Davenport on December 8th, 2008 1:02 am

    Nah, never found out. My conclusion was oil companies are greedy :).

  3. Drew Wegert on January 3rd, 2009 12:07 am

    You talk about ethanol prices and how they are increasing due to the price of oil going up but have you done any research on other alternatives? For example: Methanol/M85, compressed natural gas, or biodiesel. The oil company may be increasing the price on ethanol “in some locations” but ethanol isn’t the only alternative the U.S. is thinking of converting to. How can you assume the oil company will increase these prices?

  4. Trai Davenport on January 10th, 2009 3:28 am

    Like I said, I am not an economist. I am just making observations. Whether they are educated or not, I’ll leave that up to the reader :).

    However, I do know that the Oil Companies own most of the places that E85 is purchased from. I haven’t done enough research to give a written opinion of these other fuels that you have mentioned but I am aware of them. The point I was making in the post above was that you have Oil Companies in control of the Oil and the distribution of it. There’s no way they would shoot themselves in the foot and make alternative fuels that they sell cheaper than gas. So, in my opinion, until the Oil Companies are removed from the distribution of these fuels the marketplace will never see true competition.

    Case in point. Many of us have read about Internet providers (Comcast, etc..) setting download limits. Do you think they do this because they are concerned about the users internet quality being disrupted by other users taking more than their share? That is what they would have you believe, but the real reason is because they don’t want another company using their “supply line” to sell their own services (TV over Internet, Movie Downloading Services, etc..). It’s no different with the Oil Companies. As long as they own and operate the distribution of fuel they are not going to allow their competitors to use that to put them out of business. That’s my .02.

  5. Will on March 17th, 2009 9:49 pm

    I think you hit the nail on the head about who owns what and with the comparison to Microsoft.

    How long was that lawsuit by the justice department, 4 years? Over Internet Explorer? Seriously? Can someone explain why spending 4 years suing Microsoft over a free browser is more justified than making sure there’s true competition for fuel?

    This message was approved by the committee to elect Will as Secretary of Perspective.

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