Monday, June 16, 2008

The E85 Temptation

Anyone with a flex-fuel vehicle is probably feeling pretty fortunate to be able to fill up at the gas station with E85 these days. For the rest of us, we can only stare longingly at the gleaming yellow handle of the E85 pump — a beacon of inaccessible savings. But is filling up with E85 really that much cheaper?

According to AAA’s Daily Fuel Gauge Report, the national average for E85 is $3.56 a gallon — 52 cents cheaper than a gallon of regular unleaded. That translates to a savings of almost $8 per fill-up on a car with a 15 gallon tank. Unfortunately, it's not that simple.

Fueleconomy.gov reports that using E85 instead of regular unleaded reduces gas mileage by 20-30 percent. The reason is that ethanol has less energy per gallon than gasoline, so that 52 cent savings—about 13 percent less than regular gas—actually costs more in the long run. The true cost of using E85 is about 16 percent more than gas to go the same distance.

Just a month ago, the cost comparison between gas and E85 was not as clear as it is today. E85 was averaging almost 17 percent (64 cents) cheaper than gas. The recent increase is due, in part, to the flooding in the Midwest, which is jeopardizing the corn crop. In general, however, the increasing demand for corn-based ethanol has been pusing up food prices around the world, which also pushes up the price of ethanol. Now take into account the 51 cent-per-gallon subsidy that producers get for each gallon of ethanol they mix with gasoline, and the apparent financial benefits of E85 erode even further.

Of course there are other motives at play here, not just cost savings. E85 burns cleaner, helps US farmers, and reduces our need to import oil. These other factors have different values to different people, but if you just need to save some money on gas, E85 will not deliver the savings you are looking for.

Anyone with a flex-fuel vehicle is probably feeling pretty fortunate to be able to fill up at the gas station with E85 these days. For the rest of us, we can only stare longingly at the gleaming yellow handle of the E85 pump — a beacon of inaccessible savings. But is filling up with E85 really that much cheaper?

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