Filling Up In Nebraska: A Conspiracy Theory

July 4th, 2011 at 8:58 pm

I took the picture below when I was filling up the tank earlier today in Nebraska.  Weird, right?

The higher octane gas (“Plus”) costs $0.15 less per gallon than the regular.  I thought it was a mistake in the signage, but no.  Along with higher octane, the “plus” contained 10% ethanol—the regular was corn-free.

Still, why was it cheaper?  I spoke to one native who told me this price differential is pretty recent.

I know—don’t draw conclusions from samples where n=1.  But I wonder: could it be the case that with ethanol subsidies under attack from all sides, producers and retailers started passing part of the subsidies along to consumers?  That way, they build allegiance for the subsidies at the retail level and can warn drivers how much prices will rise if Congress does the right thing and gets rid of the subsidies.

Any Nebraskans out there to confirm or deny this allegation?

 

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14 comments in reply to "Filling Up In Nebraska: A Conspiracy Theory"

  1. Rob says:

    Jered,

    In Omaha “Plus” gas has been less than “Regular” for as long as I can remember. I’ve lived here 20 years. I think the state provides a subsidy via differential taxation. However, that can’t explain all of the difference as it has widened to about 15 cents/gallon in 2011. For years the difference was 4 cents.


  2. bakho says:

    Dude.
    Ethanol has lower energy content per gallon than octane so your MPG goes down.

    The dollar per mile traveled is better with regular even though the price is higher.
    jonny bakho


  3. Donsig says:

    I’ve lived in Nebraska since 1997 and “plus” has been cheaper all of that time. “Plus” is not a mid-point between between regular and premium. It’s better called “E-10″ or something like that, meaning regular gas with 10% ethanol. The energy content is less than regular, so it needs to be cheaper, usually about 5-10 cents a gallon. Depending on the price, it may or may not be more energy efficient. This is my memory, so the numbers may be off, but it’s not unusual.

    How do we persuade you to stop in Lincoln to give a talk sometime?


    • Jared Bernstein says:

      OK–this mystery appears to be evaporating…and I’ll be sure to make a point of stopping Lincoln next time I’m out that way.


  4. Dilip says:

    This is not just in Nebraska. Back when we lived in Minnesota, we used to drive to Iowa and over there I have always noticed that Plus was a little cheaper than regular. Unlike the picture you have posted above, in those gas pumps I have seen stickers mentioning that Plus contains 10% ethanol. I always assumed that is why it was cheaper.

    This link might help:
    http://biofuelsdigest.com/bdigest/2011/05/30/e85-ethanol-in-the-us-dead-or-alive/


  5. Amod Vaze says:

    This is nothing new. I was a student at the University of Iowa in the mid-1990′s and noticed this too. As a native New Yorker this caught me by surprise (as well as how much cheaper the price of gasoline was compared to NYC) until a local resident explained to me the same thing that a number of people have mentioned above.


  6. Nick Tonkin says:

    I monitor fuel mileage very closely on my Elantra and I get 10 – 15% lower fuel mileage with ethanol laced gas. I don’t know how they figure the higher octane due to ethanol but from my experience you can pay even more, as much as $0.35/gal, for regular without ethanol and save money.


  7. Phil says:

    South Dakota has the same price differential for “Plus” gasoline and has since I moved to SD in the late 1990s. As I understand it many corn belt states passed subsidies for ethanol-added gasoline to make it cheaper than Regular gasoline and support the new ethanol plants and industry in the state.

    As an aside, the Wall Street Journal had an article on the impact that increased corn-based ethanol use was having on CRP land in the eastern plains. It was not good – it was converting ” pothole” wetlands to farmland and decreasing the amount of habitat for migrating birds.


  8. Kevin Rica says:

    Ethanol is an octane enhancer. Even without subsidies and mandates, you need additives to increase octane. It used to be MTBE and when that was withdrawn for environmental reasons, the industry turned to ethanol (but you don’t need 10%).

    Higher octane gasoline is more expensive to produce: If you need to meet octane requirments without ethanol, it is a more expensive refining and blending process. So the “Plus” is probably cheaper gasoline mixed with even cheaper ethanol. (Last I looked ethanol was probably 20 – 30 cents cheaper + the blender gets the 45 cent tax credit — that about 6 or 7 cents on a 10 percent blend.) It’s cehaper to produce, you don’t go that far, but in states less familiar with hooch, you can sell it for the same price.

    The irony is that there is a strong preference (their drivers will pay a premium)for Everclear-free gasoline in exactly those mid-Western corn states that want the ethanol mandates for everyone.


    • Chigliakus says:

      Outside the corn belt MTBE was replaced with benzene derivatives like toluene and xylene. These have a stoichiometry closer to gasoline (so they don’t lower the energy density) and they don’t have the annoying tendency to take on water from the air.

      It’s not really ironic that people in the corn belt prefer the ethanol-free gas, as was stated above they get better mileage. Stoich for normal gasoline is ~14:1 whereas for pure ethanol it’s ~8:1 air:fuel so you have to burn a lot more ethanol for the same number of miles traveled. The only people I know of who actually like ethanol in their gasoline are some people who run custom turbocharged American V8 engines. They’re running custom fuel systems and tunes so adjusting for E85 (85% ethanol gasoline) is easy and they love the higher octane because it allows them to turn up the boost and make more horsepower.


  9. S Hudson says:

    Ethanol for vehicles goes back a long way. Henry Ford designed the Model T to run on pure ethanol. Several posters correctly stated that Ethanol was also introduced as a later octane booster when Lead was removed from Gasoline. A fact NOT mentioned is that the only byproduct of burning ethanol is heat, carbon dioxide and water vapor. NO carbon monoxide and no hydrocarbons. The other ETBE’s Toluene, Benzene and Xylene that are used to replace MTBE’s are certainly not as environmentally friendly as ethanol. In fact, all of them are toxic.

    One of the most important reasons that corn was used to make ethanol and was subsidized by the federal and state governments was to combat the extremely low prices paid to farmers for corn up until very recently. In the 80′s and much of the 90′s, raising corn (and other crops), without the subsidies was a money losing proposition for many smaller farmers. I can remember farmers getting less than $2.70 / bushel. Soybeans were little better and Wheat was even less. I can just imagine how many of you will be bitching about food prices when all the small farmers are gone and the corporate conglomerates own 90% of the farmland. Think prices will go down? NOT!

    And by the way, many products used on farms to grow the food you eat require petroleum products to make. Most fertilizers, many herbicides and insecticides contain petroleum byproducts. So use of Ethanol helps reduce our dependance on fossil fuels. That should make the environmentalists happy.

    Currently corn prices (mostly due to world grain prices) has gotten high enough that Ethanol producers can no longer afford to buy it for production. Many Ethanol plants in Nebraska have closed or will close unless they can find an alternative to corn.

    Why are corn prices so high? Well, that’s due a number of factors. 2 very bad years back to back. 2011 had the worst floods in history in the Missouri River valley. Over 1 million acres of farmland were destroyed. In 2012, the worst drought since the dust bowl destroyed crops in most of the central united states. Crop failures in other corn producing countries increased exports of U.S. Corn. Cost of U.S. corn got high enough that exports have started dropping. Even so, the United States accounts for 55% of the corn exports in the world.

    In 2011 Ethanol production had decreased slightly over 2010 and 2012 had decreased dramatically due to the higher prices of corn on the world market.

    Lastly, isn’t it President Obama and the Democrats that want to develop alternative energy sources? Why is it so many Liberals want to kill Ethanol?

    To answer the statement that E-10 is far less efficient as straight gasoline, I have done my own testing. My 2011 Honda Odyssey averages 19.9 mpg (city and highway mix) on E-10, and 21.3 mpg with 87 octane gasoline. These averages were done with over 2000 miles of as similar driving habits as I could maintain. I know that’s not strict scientific testing, but it answered my question.

    According to my calculations that makes straight gasoline only 6.5% more efficient as E-10, yet we’re replacing 10% of the hydrocarbon based fuel with fuel that is not damaging at all to the environment.

    Now let’s consider that gasoline price sign. The percentage difference in cost between the 3.55 gasoline and 3.40 ethanol is 4%. To me that makes a pretty good bargain for the Ethanol.

    Should we keep the subsidies? Better fuel to cost ratio, better for the environment, In more normal times, better for the small farmers, in the long run better for food buying consumers.

    And before any of you throw the argument that ethanol takes food away from feeding livestock. That’s also incorrect. The MASH left over from making the ethanol is pellitized into animal feed, which pound for pound is considerably more digestible and nutritional for the animals. Virtually nothing is thrown away. Don’t believe that? Eat some corn on the cob and see what comes out your other end the next day. Whole undigested corn kernels. Sorry if that offends anyone’s sensibilities. Animals stomachs don’t digest whole corn much better.


  10. Heather says:

    I lived in Iowa for 22 years before moving to IL. I also drive through NE at least 4 times a year (the entire width of the state). Iowa and NE both have cheaper 89 octane fuel, and have since as long as I can remember. Iowa is #1 in Ethanol production, NE is #2.

    Ethanol does in fact cost more than unleaded gasoline. If I also recall, a higher octane above the recommended lowers fuel efficiency as I think it’s because the engine doesn’t otherwise take advantage of igniting at a higher compression ratio.

    In IA and NE, I think ethanol (mid-grade) is cheaper due to states’ tax subsidies…


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