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Brazilton KS | It's not a conspiracy, it's a market. The market is naturally going to drive the cost to an equal level when the fuels are interchangible in many vehicles. If gas is cheaper, flex vehicles tend to flex to gas, easing supply of alcohol and increasing demand for gasoline. If alcohol is cheaper, the opposite happens. As long as the primary demand for each is simply as motor fuel the cost per mile will stay similar. Currently, however, the primary demand for the alcohol is as an oxygenate for reformulated gasoline. This demand is greater then the supply, so it is controlling the price. There are no real competitive alternatives for meeting reformulated standards in some markets, so the price of the alcohol becomes pretty much whatever it takes to buy enough to meet the demand because at the small percentages it really doesn't change the end product price enough to move very far on the demand curve. Once supply increases to satisfy this demand, the primary demand will most likely become as an octane increaser, and the price may still remain above regular because the alcohol will allow subgrade gasoline to have it's octane increased to regular levels. Since the subgrade is lower priced then regular, the alcohol can be higher priced then regular and still allow the end product to sell competitively against regular. E85 is not going to really work competitively as motor fuel until there is more alcohol then what is needed to blend gasoline at lower levels.
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E85 and pricing
