Higher Ethanol Blends Could Mean Savings at the Pump

Cindy Zimmerman

Renewable Fuels Association LogoAccording to the Renewable Fuels Association, American drivers could be saving 12-19 cents per gallon if more ethanol were allowed in gasoline.

Based on current wholesale prices, ethanol is selling for $0.70-$0.80 less than gasoline before the federal tax incentive for blenders is taken into account. This means gasoline blended with the statutory limit of 10% ethanol (E10) should cost at least 7-8 cents per gallon less at the pump than conventional gasoline without ethanol. However, if blenders were allowed to blend up to 15% (E15) ethanol in each gallon, drivers could be saving up to an additional nickel on every gallon.

The savings are even greater when the value of the $0.45 per gallon tax credit claimed by gasoline blenders is passed through to consumers. Gasoline blenders receive the tax credit for every gallon of ethanol they blend with gasoline. When the full value of the credit is passed through to the consumer on E15, the fuel would be a whopping 19 cents per gallon less expensive than conventional gasoline without ethanol at today’s prices. This translates to a savings of about $3 per fill-up for the average vehicle or approximately $150 per year for the average driver.

“As gas prices soar this spring like every other before it, drivers are being forced to pay higher prices than they otherwise should be,” said Renewable Fuels Association President Bob Dinneen. “Based on the economics today, gasoline refiners and blenders would be clamoring to use more ethanol but are prevented from doing so by EPA. It’s time for EPA to update its fuel regulations and allow for the use of 15% ethanol blends for all vehicles, giving American consumers the break at the pump they deserve.”

The Environmental Protection Agency is currently considering a waiver request to increase the amount of ethanol allowed in a gallon of gasoline from 10 to 15%, which would allow refiners and blenders flexibility to increase the blend level when it is economically advantageous to do so.

Ethanol, Ethanol News, RFA