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.
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.