by Jim Lane (Biofuels Digest) As a Perfect Storm of price problems ends, will E85 finally find its market and help end a divisive debate over ethanol distribution?
2014 is the year of E85, if there ever was one. Or will be one.
Why? There’s more pressure on the Renewable Fuel Standard than ever — most of it focused on the problems of the ethanol blend wall. And, with a bumper corn crop and no relief on high gasoline prices in sight, the commodity prices are expected to be in line.
As of today, there are at least 11 million flex-fuel vehicles in the United States, capable of using E85 or other higher ethanol blends. The American Coalition for Ethanol projects that there are 15 million. There are roughly 2500 outlets that sell E85 fuels.
More importantly, prices appear to be coming in line, as a bumper US corn crop is expected to cause corn prices to plummet later this year and into 2014 — while gasoline prices remain high.
Which means that, by March, the underlying commodity cost in E85 will be roughly 69% of the cost of regular unleaded — well ahead of the break-even point where it makes sense for flex-fuel vehicle drivers, on price alone, to use E85.
The Iowa Renewable Fuels Association has been aggressive in getting behind E85 this year. This week, they announced the launch of its E85 Wholesale Price Listing Service. The IRFA lists E85 prices from wholesale distributors with the intent of increasing transparency in the marketplace, allowing retailers to review supply options in one location.
Here’s how it could work. Using the Absolute Energy model, corn ethanol producers could make an E85 product available in 2014 for $1.85 per gallon, wholesale. That might provide a compelling price point for consumers — a 30 percent discount to gasoline, which provides a savings in terms of dollars per mile. To jump-start the market, why not a promotional series of events featuring $1.85 per gallon retail E85.
The cost to ethanol producers? Not much, if any. $1.85 per gallon would value their ethanol at 3.4 cents per gallon more than the March CBOT contract — more than enough to offset the cost of $1.85 retail promotions. READ MORE