Brandishing Dangerous Logic At The Fuel Pump

| 5 Comments

So a new gas station just opened near where I live, and among their offerings is the new E85 fuel that is 85% ethanol and 15% gasoline (hence the name). It's always priced 20 cents below unleaded regular, regardless of how the price of unleaded changes (and this being Fort Wayne, it changes a lot).

Why does its price vary exactly as gasoline's does when it's only 15% gasoline?

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5 Comments

I work right across from that very station and was wondering the same thing. Maybe I'll head over there during lunch one day and ask someone about that...

Um, because ADM* wants it that way?

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*ADM is the Archer Daniels Midland Company (www.admworld.com). Taken from a recent press release: "ADM has over 25,000 employees, more than 250 processing plants and net sales for the fiscal year ended June 30, 2005 of $35.9 billion."

There are many theories on why the price of E85 varies so much. Certainly, there are many factors -- the cost of corn, processing costs for ethanol, etc. Bottom line, like any product, the prices often reflect what the market will bear.

However, in any discussion of the vaulue of E85 you should consider that it is significantly cleaner-burning than gasoline, and can help reduce air pollution in Indiana.

That's why we at the American Lung Association of Minnesota strongly support E85. In case you are wondering, no, we don't get a dime from ADM...

I don't disagree with anything you said (in fact, I wish my car was E85-compatible, and not just because it's cheaper), but I think you missed my point. Indeed, your first paragraph delineates a couple of good reasons why E85 prices should vary *differently* than gasoline prices do, and yet they don't.

Why not?

I suspect Grimblefig is closer to the answer than we want to admit.

Ok, I see where your going now.

Maybe after nearly a century selling only petroluem-based fuels, gasoline retailers just don't know any other way to price this new product.

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This page contains a single entry by Chris published on January 16, 2006 12:04 PM.

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