Gas prices: How dependent are they on ethanol? - KTTC Rochester, Austin, Mason City News, Weather and Sports

Gas prices: How dependent are they on ethanol?


EYOTA, Minn. (KTTC) -- In the past few weeks you may have noticed gas prices on the rise. One study attributes that to the price of ethanol.

The most recent Lundberg Survey released on Sunday blames a $0.10 increase in the price of gas on rising ethanol prices due to the uncertainty in Ukraine.

But area corn producers say that's not the case. We spoke to Dan Brandt, president of the Olmsted/South Wabasha Corn and Soybean Growers. He said ethanol actually lowers the price of gasoline on the whole.

In Plainview, E-85 is a full dollar cheaper than regular gasoline because of the ethanol content.

"You can buy bulk E-85 out of Lyle Minnesota for a $1.91, and you can buy it retail for $2.49," said Brandt. "That's a good buy for the consumer and it's a good margin for the seller. To say that ethanol is driving up the price of regular gas simply is not true."

He's right, ethanol is cheaper than crude oil, so the more ethanol in a gas blend, the cheaper the gas will be.

Your regular gasoline has 10 percent ethanol, which makes it cheaper than it would be without any ethanol.

But the Lundberg Survey makes a slightly different statement. They're talking about the cost nationwide of that 10 percent of ethanol.

These are ethanol futures from the Chicago Board of Trade over the last six months. As you can see, for a while, things are pretty steady, but in February and early March, it picks up. That points to what is in the Lundberg Survey about the ethanol market. The survey says the market is changing because of uncertainty about what is happening in Ukraine, a country that produces a lot of corn.

But those aren't the prices ethanol is actually being sold at today. Those vary across the country.

There are also a lot of factors that go into how gasoline is actually priced, which is why the price at the pump varies so greatly across the country.

Here's another factor: Minnesota and Iowa are some of the biggest ethanol producers in the country, so those concerns about Ukraine in the survey may not have as big of an impact here as they do in the rest of the country.

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