E85 use back on the rise in Minnesota

Posted by Paul Tosto on Minnesota Public Radio’s website

Back in February, I asked: Are Minnesotans voting no on E85?

I wrote, “While use of the fuel (85 percent corn-based ethanol and 15 percent gasoline) is rising in government fleets, overall E85 sales fell more than 25 percent from 2008 to 2009 following years of big increases.” Recent data from the state Commerce Department, however, show E85 consumption climbing back toward pre-recession levels. (Click on the chart for a larger view)

In the worst parts of the recession, fuel use, including E85, dropped significantly, and the cost gap narrowed between gasoline and the typically lower priced E85. Those were the chief reasons consumption dropped.

The price gap widened again earlier this year as average regular gasoline prices ran above $2.70 a gallon most of the spring in Minnesota, while E85 averaged $2.20 to $2.26, which explains why the use of E85 is on the upswing again.

I eat my words!

Comments (2)

Bravo, Sir!

Thanks for taking a second look at the numbers. We have been seeing the same trend. Recently, a Litchfield, MN station sold 1,972 gallons of E85 during a 3-hour promotion.

E85 sales are certainly coming back.

Bob Moffitt, Communications Director, Clean Fuel & Vehicle Technologies
American Lung Association in Minnesota

Posted by Bob Moffitt | July 13, 2010 3:17 PM

 Bob, thanks, I think!

I’m a free market guy at heart and still wonder about the benefits of E85 compared to its economic and environmental costs. But the fact is consumption began climbing again after my post and I needed to highlight that. Cheers.

Posted by Paul / MinnEcon | July 14, 2010 9:38 AM

 http://minnesota.publicradio.org/collections/special/columns/minnecon/archive/2010/07/e85-use-back-on-the-rise-in-minnesota.shtml

Our Take:
It’s refreshing to see someone revisit E85 in a balanced way and admit his previous judgment was off base—the writer thought sales data showed consumers dropping E85 in favor of gasoline.

 Where such expressions of opinion tend to become extremely emotional, and pundits become invested in their positions, it is wonderful to see someone in print reconsider and modify his views. Yes, now that the economic storm has passed (for the moment) E85 is once again on a growth curve.

 We do think Mr. Tosto could go a little further and look at the Department of Energy’s statistics on gasoline sales. They tell a different tale. Though over a longer period, the reduction in America’s use of gasoline has been even steeper than the slack in E85 sales.

 Here is the EIA web site:

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M

 From 1999-2003 Americans were consuming in excess of 60 million gallons of gasoline a day. Even in 2004 through 2006, significant periods of time saw sales in that range. And then the worst economic meltdown since the Great Depression happened. Americans had an epiphany—they could switch to more economical cars and drive less in order to save money they wanted to hold on to, in case the worst happened—pay cuts, job loss, business failures. Over the same period that Tosto perceived people voting against E85 with their pocketbooks, sales for gasoline were also dropping significantly.

 In mid-2009, gasoline use dropped below 50 million gallons per day for the first time since 1983, apparently reflecting not only the ongoing quiet period in economic activity, but also showing our more or less permanent change in attitude towards fuel consumption.

 Compare the latest figures for gasoline sales—in May 2010 America averaged gasoline sales of 46.17 million gallons per day. Compare that to May 2003, at the height of America’s love affair with big vehicles, when you see sales of 66.8 million gallons of gas a day. That’s a 20-plus million gallon per day drop, or a 30 percent drop in usage. 

 We wouldn’t call that America voting against gasoline. We would call it a new awareness of how we use resources, including our money.

Mr. Tosto is right to point out the price sensitivity of E85 sales. For all the somewhat intangible benefits like improved air quality (it’s tangible, but it’s incremental to the point that people can forget to notice what it is like to have nice breathable air in the Twin Cities, thanks to the universal use of E10 and the growing use of E85), it is a beneficial price difference that seals the deal for many E85 customers.

So it’s important to note that we can’t rely on economics alone to change our habits and move over to renewable energy. It is a positive thing that less fuel is being burned, but this has had a negative impact on ethanol right alongside gasoline. And that makes continuing incentives, building more infrastructure, and allowing higher blend rates all part of a comprehensive package that moves Americans into more and more domestically produced, cleaner burning renewable energy.

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