ED's Blog — by The Godfather of Biodiesel in the Northeast

Whats the likely future for E85 with the expiration of VEEP?

Written by Ed Burke | Feb 14, 2012 1:36:00 PM

January 1 2012 saw the expiration of the Volumetric Ethanol Excise Tax Credit (VEET).

For the end gasoline user (non retail), this would have been the 4.5 cent per gallon discount on the invoice you recieved for all gas purchased product that featured the standard 10% Ethanol blend.

For the retail end user filling up at the station, this credit was a large part of what allowed you to fill your Ford or GMC Flex Fuel car or truck with E85 at a substantial savings over standard E10.

However, if you had purchased E85, the credit would have been 38.25 cents per gallon (due to the 85% Ethanol).

What happens when youre a high volume E85 retailer or dealer and you stop getting 38.25 cents back on the gallon? This credit was critical to maintaining the price spread between E85 and RBOB, or regular unleaded gasoline, especially at the retail level. The spread has been what has really fueled the growth of E85 use, as flex fuel vehicle drivers, who can fuel their vehicles on either E85 or standard E10 gasoline can literally choose which product to fill their car with at the pump, depending on the pricing.

I spoke with CSP regarding this issue in a recent article they published. My view is that the spread between E85 and RBOB needs to be in the vicinity of 25% in order to fuel growth, unless you see larger segments of municipal fleet type end users, which may make the spread less critical. To read the whole article you can go here: http://www.cspnet.com/news/fuels/articles/e85s-price-crunch

Below is a shot of our biofuels center before the opening, and a shot of us trying to figure out this whole flex fuel vehicle thing way back in probably 2005/early 2006 with a loaner GMC "live green go yellow" Impala