Friday, July 10, 2009

A Rough Year for High Ethanol Blends

By Kate Galbraith
The New York Times
July 10, 2009

Far fewer people have been refueling with high ethanol blends this year in parts of the Midwest.

In North Dakota, sales of E85 — gasoline blended with 85 percent ethanol — were down by more than 60 percent this year from January to May, compared with a year earlier, according to the state’s Department of Commerce.

Minnesota has also seen a severe dip in E85 sales, according to the Minneapolis Star Tribune. Around 1.5 million gallons were sold in May — which is almost 1 million less than a year earlier, the paper reports.

National figures are not tallied by the Energy Department.

“It’s all about price, price and price,” said Phil Lambert, the vice-president for market development at Growth Energy, an ethanol lobby group. He noted that consumption of regular gasoline has also fallen across the country.

E85 can be used in “flex-fuel” vehicles, which can also take regular gasoline. Mr. Lambert said that there were slightly more than 8 million such vehicles in the United States today, or less than 3 percent of all vehicles.

Because ethanol has a lower energy content than gasoline, ideally it should be priced 15 to 20 percent lower than regular unleaded to make it worthwhile on a cost-for-energy basis, according to Mr. Lambert. Consumers, he said, should “never, ever, ever buy E85 when it is priced higher than gasoline.”

But the price was higher, at least briefly, in Iowa, according to Monte Shaw, the executive director of the Iowa Renewble Fuels Association, in the wake of plunging gasoline prices last year.

In Fargo, N.D., E85 was retailing for up to 20 cents above regular gasoline prices this spring, according to Julie Fedorchak, the communications manager for the state’s Department of Commerce — and the town of Harvey, N.D. even put bags over its E85 pumps for a time.

Recent months have brought better news for the industry. Harvey has taken the bags off its pumps, and several states report a pick-up in demand as prices return to a more viable level.

Growth Energy has a calculator on its E85 Web site suggesting that the fuel is currently priced 15 percent below regular gasoline, although there is substantial local variation.

Mr. Shaw of Iowa said that he had recently filled up at a pump where E85 was at least 70 cents cheaper than gasoline. “That’s very attractive,” he said.

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