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dan45mcc

Ethanol More Expensive than Gasoline

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sorry for going off topic...  but there is not much going on here... have to find SOMETHING to post! :)

 

I try to post links to positive stories about new plants, new technology... but nothing seems to rally much conversation. :'(

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price spead here in fargo is 50 cents

 

 

We are looking at the Commodity Prices..  Specifically the Chicago Board of Trade

 

 

You see RBOB in the image? That's Refined Gasoline (the finished product)  selling for : $2.63  and Ethanol is selling for $2.43

 

 

So lets forget about Federal/State taxes, transport etc..

 

 

If the VEETC (the blenders credit) of .45 cents per gallon was gone (which it is scheduled to expire Dec 31 ) then E85 will cost More than gasoline at the Pump

 

 

 

 

E85 is 85% ethanol ..so right now E85 gets roughly .38 cents of the .45 cents per gallon blenders credit.. ethanol selling at $2.43 - 38 cents credit = $2.05 vs $2.63 for Gasoline .. even after adding taxes , transport etc  that means the retailer can sell E85 for roughly 58 cents less than gasoline

 

 

Now POOF and the blenders credit is gone now add that .38 cents back on ..= $2.43 -expect for E85 ..85% of that is ethanol ..85% of 2.43 = 2.06 worth of ethanol and 15% gasoline..15% of $2.63 = 39.5 cents..  $2.06 ethanol + 0.395= $2.45 for E85

 

 

$2.63 Gasoline- $2.45 E85 = .18    so basically the most discount that the retailer could give today if there was no Blenders credit would be roughly 18 cents

 

Which is terrible..and when I started this thread last week ethanol was actually more expensive than gasoline..

 

 

 

 

 

 

 

 

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The Price of E85 really isn't set by the Retailer..the Price originates at the Commodities Market..  Very Important to follow the price of corn , the price of Oil ..that sets the price for the end products of the other commodities of ethanol and gasoline

 

 

 

 

 

 

http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn.html

 

 

http://www.cmegroup.com/trading/energy/

 

 

 

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There are two different views on how to handle this issue when the VEETC expires in a couple months..

 

 

One View is to Lobby Congress to keep the VEETC for E85 ..  I think that is fine for short term 1 year or so ..the problem is eventually that credit will have to expire as well..it is a bandage approach in my view.

 

 

I believe the correct path is to lower the Price pressure on corn.. it is a LONG term solution.

 

 

Corn is expensive (thus ethanol/E85)because 14 billion gallons of corn ethanol is being produced when the RFS only requires 12.6 billion.. we are OVER Producing ethanol and 99% of that 14 billion gallons is used for nothing more than a gasoline additive !(E10)  isn't even used as an alternative fuel like E85 !

 

 

and to top it off 1 Billion Gallons of corn ethanol is being EXPORTED !! Not even used by Americans ..we are Paying MORE for E85 in part because they are exporting corn ethanol..  That 1 billion Gallons exported is more than twice the ethanol being used as E85 in the United States

 

 

So it is clear IMO that we need to take pressure off corn prices/ethanol prices by lowering E10 to say E7,E8,E9 when corn reaches a certain price..that would mean a couple billion gallons LESS being produced and the Market price for corn /ethanol would fall accordingly and E85 wouldn't need any subsidy..  We could have right now ethanol selling for $2.00 gallon vs $2.63 for Gasoline simply by lowering E10 to E8,E9

 

 

Something along those lines until other ethanol feed-stocks (MSW, switch-grasses, field waste , algae ,etc.. start coming to market and contributing volume..

 

 

 

That's Common sense ..the ONLY people who don't like it is the Corn Lobby and the RFA ..the RFA doesn't like it because they are funded by the Corn Industry and essentially paid by corn to be their Lobby Voice..

 

 

At the other end of the extremist you have those that completely want to shut down ethanol altogether..

 

 

Just hoping that the our members can see how both extremes would and are hurting E85 ..

 

 

We're here because we want to drive not only an alternative to gasoline but an alternative that is less expensive than gasoline..running up the price of corn for the sake of spitting 10% ethanol in everyone's gasoline is NOT in our E85 best interest

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Dan- I would add one or two more options to your list- both of which involve the tax rate. 1) declare E70-85 (only) as an alternative fuel and tax it like propane/CNG ---OR---2) move all taxes to a btu basis (i still have a huge problem with ethanol paying nearly the same volumetric tax as diesel which has 2x the btu content--and it is not much better for ethanol/gas-- this is so blatently unfair to end users and producers) :sign0085:

 

One problem with cutting the % of the base blend (a valid idea) is that it would have to be cut very sharply to overcome the natural offset that would then occur with exports. To some degree one also has to be careful with moves to restrict or encourage exports too sharply lest you stir up international trade dumping or other issues.

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If the VEETC (the blenders credit) of .45 cents per gallon was gone (which it is scheduled to expire Dec 31 ) then E85 will cost More than gasoline at the Pump

 

E85 is 85% ethanol ..so right now E85 gets roughly .38 cents of the .45 cents per gallon blenders credit.. ethanol selling at $2.43 - 38 cents credit = $2.05 vs $2.63 for Gasoline .. even after adding taxes , transport etc  that means the retailer can sell E85 for roughly 58 cents less than gasoline

 

Now POOF and the blenders credit is gone now add that .38 cents back on ..= $2.43 -expect for E85 ..85% of that is ethanol ..85% of 2.43 = 2.06 worth of ethanol and 15% gasoline..15% of $2.63 = 39.5 cents..  $2.06 ethanol + 0.395= $2.45 for E85

 

$2.63 Gasoline- $2.45 E85 = .18    so basically the most discount that the retailer could give today if there was no Blenders credit would be roughly 18 cents

 

Which is terrible..and when I started this thread last week ethanol was actually more expensive than gasoline..

 

That assumption is based on the VEETC is actually reducing the price of the fuel. I have never seen a breakdown showing what the VEETC actually reduces the price of fuel in the make up of a gallon of the fuel whatever blend. You see can easily find what taxes make up the percentage of a gallon of fuel, what they are, but I have never seen where there is a reduction from VEETC. We are talking about a credit filed for and received after the product is blended. Sure it's being handed out, but are consumers seeing it, or is that credit going to the blenders account'sand not being passed on? Wasn't VEETC's purpose to help the investment costs of adding equipment to blend to meet the demand for the blenders? Not to subsidize the cost per gallon?

 

Another important fact is the mandate. Yes the mandate states to produce a minimum amount but no ceiling on maximum amount. Why penalize a producer for going over the mandated amount. If there were more FFV's using high blended E- fuels and the demand was there to support it, the over production of Ethanol would not be a topic. In fact if the demand was so great that the producers were not meeting the demand, say 16 million gallon need for FFV's, this board would be full of topics to produce more!

 

Back on topic now.......Ethanol is now lower than Gas. Why, because too many speculations effecting the corn market to drive up the Ethanol right before harvest. Now that everyone sees the harvest is better than the doom and gloom predicted by the executives sitting behind a desk in a large high rise that haven't seen a field in years, the corn and Ethanol market is back to normal. Whatever normal is! The corn market is high, but needs to stay in a medium range. $2.00 corn will put the farmers out of farming and $7.00 corn will put Ethanol producers out of production. A nice happy medium makes everyone happy.

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If the VEETC (the blenders credit) of .45 cents per gallon was gone (which it is scheduled to expire Dec 31 ) then E85 will cost More than gasoline at the Pump

 

E85 is 85% ethanol ..so right now E85 gets roughly .38 cents of the .45 cents per gallon blenders credit.. ethanol selling at $2.43 - 38 cents credit = $2.05 vs $2.63 for Gasoline .. even after adding taxes , transport etc  that means the retailer can sell E85 for roughly 58 cents less than gasoline

 

Now POOF and the blenders credit is gone now add that .38 cents back on ..= $2.43 -expect for E85 ..85% of that is ethanol ..85% of 2.43 = 2.06 worth of ethanol and 15% gasoline..15% of $2.63 = 39.5 cents..  $2.06 ethanol  0.395= $2.45 for E85

 

$2.63 Gasoline- $2.45 E85 = .18    so basically the most discount that the retailer could give today if there was no Blenders credit would be roughly 18 cents

 

Which is terrible..and when I started this thread last week ethanol was actually more expensive than gasoline..

 

That assumption is based on the VEETC is actually reducing the price of the fuel. I have never seen a breakdown showing what the VEETC actually reduces the price of fuel in the make up of a gallon of the fuel whatever blend.

 

It is Not an assumption..come on racer..How the hell do you think E85 can be 50 cents less per gallon when ethanol was priced the same as gasoline at the commodity markets?(or just a few cents less)  Seriously come on now ..the VEETC is generally be passed on..yes clearly some skimming is occurring but for the most part it is being passed on

 

agree corn needs a 'happy medium"  $6+ is NOT that happy medium when Oil is  at $85-$90 a barrel

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It is Not an assumption..come on racer..How the hell do you think E85 can be 50 cents less per gallon when ethanol was priced the same as gasoline at the commodity markets?(or just a few cents less)  Seriously come on now ..the VEETC is generally be passed on..yes clearly some skimming is occurring but for the most part it is being passed on

 

agree corn needs a 'happy medium"  $6+ is NOT that happy medium when Oil is  at $85-$90 a barrel

 

If E85 is 50 cents less per gallon and the credit is only worth 38 cents, where is the extra 12 cents coming from? When I was purchasing fuel when the markets were equal or lopsided, E-85 was no where near that savings. In fact for a few weeks the difference was less than a quarter between E0 and E85.

Here in Nebraska and at least Eastern Iowa We can still get 100% Gasoline. If I choose I can get E10 for $0.10 per gallon less than E0 just about everywhere. The VEETC on E10 is $0.045 per gallon, so evidently out of the kindness of everyones precious little hearts they are giving away the extra $0.055 per gallon if the price of RBOB and CBOT Ethanol is the same? But they must be making it back on E85 sales or something because the price difference is does not add up whatever the blend.

 

I've said it before and I'll say it again. Giving tax breaks or credits back to the consumers is not how big business works. If VEETC was a instant credit as it's blended, then I would accept the theory. Since the blenders file a credit after they blend and get the check at a later time means they have to hold on to the potential lack of predicted revenue if the paperwork or red tape get miss handled and the check doesn't come. I don't see it and the numbers don't add up. The assumptions hold validity, but the numbers aren't there to back it up.

I do support the theory of VEETC to help with the costs of additional equipment for blending of fuel whether it be to blenders as currently or to retailers to install blender pumps. It should have never been to get extra income from simply blending fuel. It should have been and needs to be a reimbursement for equipment and labor not based on gallons blended.

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It is Not an assumption..come on racer..How the hell do you think E85 can be 50 cents less per gallon when ethanol was priced the same as gasoline at the commodity markets?(or just a few cents less)  Seriously come on now ..the VEETC is generally be passed on..yes clearly some skimming is occurring but for the most part it is being passed on

 

agree corn needs a 'happy medium"  $6+ is NOT that happy medium when Oil is  at $85-$90 a barrel

 

If E85 is 50 cents less per gallon and the credit is only worth 38 cents, where is the extra 12 cents coming from?

Christ man did you even bother to read my calculations

 

 

You can refuse to believe the VEETC is not being passed on all-day long but your "belief" has nothing to do with reality.

 

 

Quit being so damn stubborn and learn to do the actual calculations

 

 

As Far as Iowa and where is the other nickle coming from

If I choose I can get E10 for $0.10 per gallon less than E0 just about everywhere. The VEETC on E10 is $0.045 per gallon, so evidently out of the kindness of everyones precious little hearts they are giving away the extra $0.055 per gallon if the price of RBOB and CBOT Ethanol is the same? But they must be making it back on E85 sales or something because the price difference is does not add up whatever the blend.
..You do Realize that Iowa (as most States) also have some credits/lower taxes on ethanol

 

 

 

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