St. Louis E85 Pricing Case Study Raises Eyebrows
October 27, 2014 - Issue #202View Full Issue
The Renewable Fuels Association (RFA) recently released the results of an in-depth case study looking into E85 pricing in the St. Louis-area showing very questionable E85 pricing by several retailers in the area.
Throughout the 2014 summer driving season, average E85 prices were 12 percent below gasoline prices at the wholesale level, but 1 percent above gasoline prices at the retail level. In addition, the wholesale-to-retail markup on E85 was nearly twice the markup on gasoline. Further, the study found E85 retail prices were roughly $1 per gallon higher than was justified by wholesale prices for locally available ethanol and hydrocarbon blendstock.
The study concludes, “… clear support for the notion that some gasoline producers/suppliers and their franchised retailers purposely employ E85 pricing strategies meant to discourage E85 consumption and negatively influence consumer perceptions about the fuel.”
“It’s fairly obvious that the retailers examined in this study—all of whom are branded by one of the Big Five oil companies—don’t really want to sell E85,” stated RFA President and CEO Bob Dinneen. “In many cases it appears they were pricing E85 above their branded gasoline for the sole purpose of making their gasoline prices look more attractive to the consumer. Sneaky E85 pricing strategies ultimately give oil refiners the opportunity to wrongly claim that consumers are ‘rejecting’ E85; and it gives them an opportunity to claim they can’t comply with Renewable Fuel Standard (RFS) requirements above the so-called ‘blend wall.’ This study exposes the utter hypocrisy of that argument.”
RFA tracked E85 and gasoline (E10) prices at all nine retail stations selling E85 in the St. Louis metro area. All nine stations carry the brand of one of the five largest integrated oil production and refining companies, which makes the St. Louis E85 market highly unusual because nationwide “…retail stations affiliated with a ‘Big Five’ oil company brand are four to six times less likely to offer E85 than independent or unbranded stations.”
To view the study, please click here.