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The Folly of Biden’s Ethanol Mandate
President Biden has authorized the use of E 85 gas for the summer. According to Business Insider, ethanol wholesales for $2.22 per gallon, and gasoline wholesales for $3.20 per gallon. Gasoline has 33% more energy than ethanol, so the gas equivalent price of ethanol is really $2.95 per gallon (2.22 x 1.33=2.9526). So the difference in price is 25 cents per gallon, but because the increase in percentage of ethanol is only 5% (moving from 90 percent to 85 percent) the actual savings per gallon is about 1.25 cents per gallon (25 x 5% = .0125).
In other words, consumers may pay less per gallon of the blend, but they will pay essentially the same amount per mile traveled. I doubt going to E 85 will affect the wholesale markets for gas and ethanol much, but if it does the effect will be to make gas a little cheaper, and ethanol a little more expensive, reducing the overall cost differential.
