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September 23, 2005

Informatio:

NEVC response to E85 price discrepancies...

National Ethanol Vehicle CoalitionRobert White, the Project Director for the (NEVC) was kind enough to write a very informative e-mail back to me, addressing some questions I had about the price discrepancies I found between E85 and regular unleaded gasoline, here in Kansas City, MO. While these “price hikes” may be temporary, there are some factors that go beyond taxes and fees. Please take some time to read this letter. If you’re a user of E85, these issues affect your directly.

Tim:
The spot price of ethanol fluctuates as much or more than regular gasoline. The price of ethanol in the Midwest was as low as $1.05 in May of this year, this morning hit $2.85/gallon, which is MORE than regular gasoline. The price of ethanol is not tied to the price of corn, just like gasoline is not tied to crude; bread is not tied to wheat, etc. Ethanol is now a component of fuel, and is priced accordingly. As the price of gasoline goes up, every component of gasoline goes up with it. The demand for ethanol is also on the rise. Please look at this link – http://www.ethanolrfa.org/pr050829.html . You can see that even back in June we were using more ethanol than we produce and there is less in stocks today causing the price to rise. The end of MTBE production by Valero in the NE region of the United States, and now in TX, has created a huge new demand for more ethanol. The ethanol industry is low on product right now, some plants are actually out. The hurricane has just compounded the situation as more want to blend ethanol to simply add cheap octane and to extend fuel supplies.
The ethanol plants are not receiving all of the profits, they do not own fuel stations – petroleum folks do. Ethanol is sent to a fuel terminal and then blended with gasoline. It is up to the petroleum marketers to get it to the consumer. I can assure you that despite the price of ethanol being $2.85/gallon today, the plants are not even receiving $2/gallon. There is not an ethanol plant in the country that sets their selling price; they are told what the price will be by the marketers.
Many stations are offered contracts to help stabilize their E85 prices, but most are not interested. They are use to buying fuel at spot prices and want to do the same with ethanol. The spot price of ethanol is normally a minimum of $.30/gallon more expensive than contract price. Today, most of the ethanol that was contracted earlier this year was priced at $1.20/gallon!
More ethanol plants will be built, and more ethanol will be blended with gasoline. The reason we do not have a large industry today is because people have not been interested in using ethanol until now, and all at once. The industry was a mere 150 million gallons in 1978, and the lack of interest from the public and the deep pockets of the petroleum industry kept ethanol very small. Ethanol already saves the consumer $.30/gallon whether you use ethanol or not. Ethanol is more than 3% of the U.S. fuel supply today.
The first place you need to complain is the station, or the supplier of that station and I would encourage you to do that. In the end, they are the first stop in getting to the root of the price of ethanol or E85. These higher prices will not be long-term, but they are here for now.
Regards,
Robert White
Project Director
National Ethanol Vehicle Coalition
3118 Emerald Lane, Suite 100
Jefferson City, MO 65109
Phone: (573) 635-8445, Ext. 5
Fax: (573) 635-5466
www.e85fuel.com
I appreciate Mr. White’s time to write back to me. This is an important issue that, I think, will only become more prevelant in the future. I urge anyone who finds similar discrepancies to act on Mr. White’s advice:
The first place you need to complain is the station, or the supplier of that station and I would encourage you to do that. In the end, they are the first stop in getting to the root of the price of ethanol or E85.
Don’t always think you’re stuck with the prices you find at fueling stations. Take action and make a difference.

Posted at 09:34 am

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Comments (12):
Amen, brother!! Nicely done, Tim! That IS interesting… Funny how we have aborted our most basic ability as a consumer cause we think it won’t do any good: COMPLAIN!

Very cool of him to write you back.

dennisthemenace () - September 23, 2005 at 10:01 am

Getting companies who aren’t finance savy to buy basically “hedge contracts” or “futures contracts” on Ethanol (defined perfectly by Richard White)is pretty difficult but not impossible. Many of the owners of these stations don’t even understand how these contracts work due to being “..used to buying spot Ethanol”. I agree we should complain but we need to know how to complain. Maybe someone can teach the concepts of these type of contracts so they can realize they can save money to the consumer and still possibly make the same profit as before? With my education in this area. maybe God wants me to do the trainning? :)

dh () - September 23, 2005 at 10:38 am

So, DH… no guns?

dennisthemenace () - September 23, 2005 at 12:21 pm

yes but karate rather than a double barrel shot gun, if you get my drift (analogous to what I said earlier)

Who knows once educated on the value of these contracts (a karate kick) you may not need to be harsh (shot gun)?

This NECV guy was pretty cool, Tim. How did you get him to respond? Veryyyyy niccccce, bro. :)

dh () - September 23, 2005 at 4:01 pm

“Chk – Chk” (cocking gun)... Alright, DH. But just incase,I’m ready.

dennisthemenace () - September 23, 2005 at 5:21 pm

Whats the most effective way to do this? letters? Protest signs (Tim loves protestors)? Guns (Dennis loves guns)? Petitions?

dennisthemenace () - September 23, 2005 at 5:24 pm

I think it is giving the people a chance to change. I feel it is ignorance rather than intentional by the entities in question. If they understood the hedging and futures contracts. Hence, my karate analogy. We don’t need to go “guns ablazin’” up front to be effective on this one..

DH () - September 26, 2005 at 08:22 am

Ummm… To answer Dennis’ questions: Letters are a good place to start. And if those letters come with petitions attached, all the better.

timsamoff () (URL) - September 26, 2005 at 08:42 am

okay, you guys. I’ll do it your way.

dennisthemenace () - September 26, 2005 at 09:55 am

For more info on ethanol, visit:

http://www.ethanol-news.com

Ethanol (URL) - May 09, 2006 at 8:27 pm

Thanks for the link!

timsamoff () (URL) - May 10, 2006 at 07:41 am

I’m glad I found this discussion, however, I think I’m just going to sell my Flexible Fuel Vehicle, start riding the bus and invest in a scooter or something.

For career reasons, within the past year I had to get rid of my Saab convertible for a minivan. In addition to the counseling sessions helping, so did the discovery that the minivan was a FFV (considering gas prices were at all-time highs). Well, after finding out that there is ONLY ONE E85 station in Kansas City…and that station has only one E85 pump, so I guess I can go ahead and say that the greater Kansas City metropolitan area of, what, 1 to 2 million people has one E85 pump…I was not as excited about the FFV discovery. One station…one pump…that would be the punch to the gut. Then, yesterday (9/5/06), I saw that a neighborhood QuikTrip had regular unleaded for $2.49 a gallon (about $0.50 lower than a few weeks ago), so I called that lone KC E85 station to find out what they were selling E85 for now. I had to ask the guy twice because I could not believe the answer the first time I heard it: $3.49/gallon! A $1.00 higher than good ol’ gasoline. That would be the knee to the groin.

I’m getting a bus pass. And more counseling sessions.

Jay Coffelt () (URL) - September 06, 2008 at 9:48 pm

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