December 14, 2011

The economics of higher ethanol blends

By Kim Clark, Ag Program Manager for the Nebraska Corn Board

In my last blog, I talked about flex fuel vehicles (FFVs), how to determine if you own a FFV and the benefits of using ethanol blended fuel, but there are pros and cons to everything, including the use of ethanol.

Although you have increased horsepower when using ethanol blended fuel, fuel mileage may decrease as the amount of ethanol in your fuel increases. However, studies have shown the optimal ethanol blend to use before you begin losing fuel mileage is E30, a mixture of 30 percent ethanol and 70 percent gasoline. At this ratio, you maintain your fuel mileage but pay less at the pump. A win-win situation!

As the ethanol ratio increases above 30 percent, fuel mileage may decrease. The largest decrease in mileage is typically seen when using E85. Studies show about a 25-30 percent reduction in mileage with E85 compared to E0.

This is important to know when fueling your FFV. Traditionally, E85 has been priced well below E0 to take into account the difference in fuel mileage, and you are saving money at the pump when using E85. However, not all gas stations offer E85 or other mid-level ethanol blends. Our website has a list of stations that do offer ethanol blended fuels up to E85.

Ethanol fuel pricing we have seen at the pump in the last few years has included a fuel blenders tax credit of 45-cents per gallon of ethanol blended. The credit – VEETC, the Volumetric Ethanol Excise Tax Credit, is set to expire at the end of this year.

In the future, we may see the price of E85 and other mid-level ethanol fuels (like E20 or E30) priced similar to E0. Will it be beneficial to use ethanol blended fuel when prices are similar given the reduction in fuel mileage? The answer is, yes!

As mentioned previously, a reduction in fuel mileage isn’t noticed when using a mixture of 30 percent ethanol or less. You may see a reduction in mileage when using ethanol blended fuel greater than E30 and the price at the pump may not make it economical to use, but we need to make a conscious choice to utilize ethanol both to reduce our reliance on foreign petroleum and realize the benefits to the environment.

To determine if it is economical to use E85 or other midlevel ethanol blends, calculate your cost per mile. This is calculated as:

Cost per gallon of fuel x (the number of gallons used to fill your vehicle / number of miles drives)

While there may be times when using a higher ethanol blended fuel is not economical, we need to remember all the benefits of using ethanol blended fuel:
  1. You are using a Nebraska grown, renewable fuel.
  2. You are helping to reduce our dependence on imported oil.
  3. Ethanol promotes energy security and independence.
  4. Ethanol creates jobs right here in Nebraska.
  5. It produces energy from a natural resource.
  6. It reduces greenhouse gas emissions.
  7. Ethanol provides flexibility and consumer choice.


  1. It should be noted that driving conditions are also important to consider. If you pull a boat or trailer or drive in an area of steep hills, the increased performance of ethanol blends will have a positive impact on the bottom line. When you use E0, it is nearly impossible to know exactly what you are putting in your tank. Gasoline is a blend of molecules and will vary due to locality, season and chance. The EPA recognizes a 20% variation in milage using E0 because of this. If you use an ethanol blend, you can be sure of one thing - the gasoline component of your fuel is NOT the E0 that you might buy at the pump. Ethanol is blended with a 'blend grade' gasoline to meet Reid vapor pressure requirements. This grade is typically more energy dense than E0. The bottom line is, that for the consumer, it is not a science but an art. Understanding the parameters will help you make better fueling decisions. Bill Brandon

  2. Very good points to make Bill and thanks for sharing this information. I will include this information in a near future blog. Thanks again! Kim Clark