Falling oil, gasoline prices cut into E85’s advantage at the pump

Source: By Jay Withrow / World-Herald staff writer • Posted: Wednesday, January 7, 2015

Nobody at the Nebraska Ethanol Board is hitting the panic button despite falling gasoline prices and the abundance of oil in the commodities markets.

Historically, E85 fuel, a blend of 85 percent ethanol and 15 percent gasoline, has been up to $1 per gallon cheaper than regular unleaded. However, recent cheaper crude oil and subsequent declining gas prices have dropped regular unleaded to around $2 a gallon, leaving E85 anywhere from just 10 cents to 40 cents per gallon under the price of regular unleaded, according to Todd Sneller, administrator of the Nebraska Ethanol Board.

Yes, said Sneller, the lower price of regular unleaded has sliced into E85 sales. But lower regular unleaded fuel prices are good for a “healthy economic sector,’’ he said. Plus, Sneller said, “ethanol values’’ remain high and strong ethanol production continues due to heavy international demand.

Another possible hit to E85 sales came as a milestone Monday when U.S. crude oil prices briefly dipped below $50 per barrel, which could translate into additional price drops for regular unleaded. U.S. crude prices had not been below $50 a barrel in five years.

But as long as automakers continue to manufacture flex fuel vehicles equipped to run on E85 fuel and as long as E85 is priced below regular unleaded, Sneller said, the board and ethanol producers remain confident about E85’s demand. Flex fuel vehicles, from Mercedes to Chevrolet, can run on E85 and regular unleaded, but non-flex fuel vehicles will not function on E85.

The falling regular unleaded prices have been attributed to an assortment of economic factors, including heavy production of North American crude, more fuel-efficient vehicles on the road and OPEC flooding the market with oil.

Monday, the average U.S. price for a gallon of regular unleaded was $2.19, down from $3.31 a year ago. Nebraska’s average price was $2.08, well under last year’s price of $3.20, and Iowa’s average was $2.02, down from $3.24 a year ago.

Some locations in Omaha on Monday sold regular unleaded gasoline for as low as $1.92 and $1.93 a gallon, and several filling stations sold regular unleaded for $1.95.