Gas drop putting pressure on ethanol industry
Photo
The price of E-85 compared to regular has a slight edge at the Kwik Trip on Milton Ave. near Old Humes Rd.
Photo
The E-85 pump at the Mobil station on Milton Ave. is as lonely as the Maytag repairman since the price of gasoline has dropped well below the price of ethanol.
JANESVILLE — You might think the rapid drop in gas prices would be good news for Manish Dadwal, owner of the Mobile gas station at 1215 Milton Ave., Janesville.
But the drop is hurting him significantly in one area: sale of E85, the blend of 85 percent ethanol and 15 percent gasoline that works in flex-fuel vehicles.
Dadwal’s E85 sales have dropped about 90 percent since the recent drop in gas prices, he said.
Dadwal isn’t the only one feeling the pain. Falling gas prices have put pressure on producers of ethanol to lower their prices, too.
The price of corn, the major input for ethanol, has fallen by more than half in the last five months, but not enough to make ethanol cheaper than gasoline industry-wide.
Last week, ethanol was trading at $1.60 a gallon on the Chicago Board of Trade, while gas was down to $1.11 on the New York Mercantile Exchange.
“They (ethanol producers) are definitely feeling some pain,” said Joshua Morby, executive director of the Wisconsin Bio Industry Alliance. “It certainly makes it tougher to sell ethanol when gas prices are as low as they are right now.”
Ethanol is generally sold in two forms: E85, which only works in flex-fuel vehicles, and E10, the blend of up to 10 percent ethanol that works in all vehicles.
Dadwal’s Mobile station is one of two Janesville stations that sell E85. (The other is Kwik Trip, 3359 Milton Ave.) He was selling E85 for $2.19 a gallon Wednesday and regular gasoline for $1.75.
He’d like to sell E85 cheaper, but he doesn’t sell enough gas to get a license to blend his own, so he’s stuck paying whatever he’s charged, he said.
His E85 business has practically disappeared, he said.
“Some people buy it,” he said. “I don’t know if they’re intentionally buying it or they’re buying it by mistake.”
Some stations have stopped mixing ethanol into their regular gasoline, too. Although some states require stations to mix 10 percent ethanol into their gasoline, Wisconsin isn’t one of them.
Still, some stations don’t have a choice, said Paul Simon, owner of Rollette Oil Co., Janesville. For example, BP won’t sell 100 percent gasoline to its Wisconsin stations, he said.
Stations that aren’t linked to a certain brand of gas, such as Kwik Trip and Woodman’s, have been able to avoid mixing the more expensive ethanol into their regular gasoline, he said.
But consumers should remember price isn’t the only attractive feature of ethanol, Morby said. It’s also a renewable, cleaner-burning fuel created in the Midwest, he said.
Russ Kashian, associate economics professor at UW-Whitewater, believes the discrepancy between gas and ethanol prices is temporary. Eventually, gas prices will rise and ethanol will again be cheaper than gas, he said.
Meanwhile, the ethanol industry can use this time to research new ways of making more efficient fuel from non-food sources, he said.
“Maybe in the long run, it gives them the possibility of moving over to switchgrass (and) cellulose—more sustainable forms of ethanol,” he said.
Dec 8, 2008 at 12:37 a.m.
Suggest removal
*NET LOSS (typo)
.
Also; Canada and Mexico are not members of OPEC, and that is our #1 and #2 importer of foreign oil.
Dec 8, 2008 at 12:33 a.m.
Suggest removal
This article also does not mention that ethanol is government subsidized, so the price would actually be even MORE then it currently is without the government subsidy. That subsidy was a special interest sell out to ADM, and the big corn/ethanol lobbies, and has cost the tax payers billions of $$$'s.
.
I have posted on this many times that the amount of energy required to produce ethanol is actually a NEW LOSS. In other words it requires more fossil fuel based energy to produce the ethanol then it saves by supplementing it in gas! Many independent studies have detailed that. The whole thing is a politically correct farce, that was sold under the bumper sticker notion of "keep $$$ out of the hands of arabs, and give it to the corn farmers". When the fact is the majority of our imported oil is from Canada and Mexico anyway.
.
Gas prices are very tricky right now. We are in a deflationary cycle right now, which drives prices down and down, as people cut back on everything, and start hoarding $$$. With all the liquidity that the feds are pumping into the economy, a turn around is likely to create hyper inflation as the dollar becomes so devalued. That would drive oil up to prices never seen before. So the big question is do we go in a deflationary spiral which was what the Great depression was all about; where prices come way down, but unemployment goes though the roof, and GDP growth is heavily contracting. Or do the feds fix it with their action, and create a potentially worse problem with a worthless dollar, and massive inflation?
Dec 7, 2008 at 11:41 p.m.
Suggest removal
How much OPEC oil does it take to power the equipment which harvests the corm and powers the plant to make the ethanol so you don't burn OPEC oil products in your car?
Dec 7, 2008 at 6:19 p.m.
Suggest removal
Yeah, keep those corn prices high so our food is expensive instead of our gas!
ETHANOL=WE ALL GO BROKE!!
Dec 7, 2008 at noon
Suggest removal
Keep buying that E-85, even if it does cost a little more. It's well worth it for me.
Dec 7, 2008 at 11:46 a.m.
Suggest removal
My truck doesn't burn e-85 so I don't have a choice.
Dec 7, 2008 at 11:23 a.m.
Suggest removal
Anytime I'm in town and need gas I head straight to Kwiktrip and fill up with E85. Yes, it does burn faster, but localboy is right at least the money isn't headed over to any Arab countries. We need to keep as much of American money in America. That really would be something if we charged other countries an arm and a leg for grains and such see how fast they start complaining instead of laughing at us.
Dec 7, 2008 at 9:58 a.m.
Suggest removal
I think we need to charge the countries we import petroleum from the same price for a bag of corn or wheat they charge for a barrow of oil. We could cut back on driving can they cut back on food imports? We feed the world and they hate U.S.
Dec 7, 2008 at 7:45 a.m.
Suggest removal
Why would this be such a surprise?? The cost of E-85 is now more than Reg. gasoline and You lose as much as 25% fuel mileage by buring the E-85. Let's use the corn for food and lower the price of the food that people need on their tables. Ethanol does not increase fuel mileage but in fact decreases fuel mileage. Find a way to use purple loosestife or switchgrass as fuel supplement.
Dec 7, 2008 at 7:38 a.m.
Suggest removal
I burn it regardless of cost, just to keep the money local, and as much possible out of the hands of the Arabs. That should be cause enough.
Dec 7, 2008 at 5:52 a.m.
Suggest removal
This could explain the slow down at work. I hope for the best, but I don't think anything negative will happen.
Before you post a comment, consider this:
Note: GazetteXtra.com does not condone or review every comment. Read more in our User Policy AgreementPost Comment
Commenting requires registration.