NCPA - National Center for Policy Analysis

PUMP GAMES

April 3, 2007

Although some oil executives voice enthusiasm for alternative fuels, oil-company policies make it harder for many service stations to stock a fuel called E85, a blend of 85 percent ethanol and 15 percent gasoline, says the Wall Street Journal.

These policies are hardly the only barrier to wider use of the ethanol fuel:

  • Demand is limited by the small number of vehicles that can burn it -- only about 5 percent of those on the road in America.
  • It can be slightly costlier to burn E85, even though it costs less per gallon, because a car doesn't go as far on a gallon of the ethanol fuel as on gasoline.
  • These demand restraints would limit service-station owners' enthusiasm for spending on the equipment needed to offer E85 even if the policies of the oil companies were not a factor.

Oil companies lose sales every time a driver chooses E85, and they employ a variety of tactics that help keep the fuel out of stations that bear the company name:

  • For instance, franchises sometimes are required to purchase all the fuel they sell from the oil company; since oil companies generally don't sell E85, the stations can't either, unless the company grants an exception and lets them buy from another supplier.
  • Contracts sometimes limit advertising of E85 and restrict the use of credit cards to pay for it.
  • Some require that any E85 pump be on a separate island, not under the main canopy.

Oil companies say they will allow stations to sell E85, but they must have certain rules for the protection of customers and protection of their brand.  They call the restrictions reasonable and in some cases necessary to make sure drivers don't fill up with E85 if their vehicle can't burn it.

Source: Laura Meckler, "Pump Games: Fill Up With Ethanol? One Obstacle Is Big Oil; Rules Keep a Key Fuel Out of Some Stations; Car Makers Push Back," Wall Street Journal, April 2, 2007.

 

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