NCPA - National Center for Policy Analysis

Gas Station Owners Suffer from Ethanol Mandate

November 10, 2014

The ethanol industry is pushing the EPA to increase the amount of ethanol that must be blended into gasoline, but Nan Swift of the National Taxpayers Union contends the industry's proposal would hurt local business owners.

Thanks to federal law, ethanol producers can count on sales each year, because the EPA's Renewable Fuel Standard (RFS) requires refiners to blend a certain amount of ethanol with traditional gasoline. Typically, gasoline will contain around 10 percent ethanol, but higher-ethanol blends (such as E15, which contains 15 percent ethanol, or E85, which has 85 percent of the corn-based fuel) do exist, and ethanol producers would like to see the RFS rise.

If refiners are required to use even more ethanol in their products, gas stations are going to have to find a way to accommodate the fuel, as traditional infrastructure cannot handle the newer blends with the higher ethanol content. According to Swift, most storage tanks, pipelines and gas pumps are not equipped to safely handle the newer fuels. She explains the financial havoc imposing higher ethanol targets would have on gas stations:

  • Upgrading gas station equipment so that it can accommodate fuel with higher ethanol content could cost $250,000 per gas station.
  • Recouping those costs will prove difficult; only 5 percent of cars even have the capacity to run on E85. Of those, each car uses just 16 gallons of E85 in an entire year.

Because demand for the fuel is so low, gas station owners will have difficulty covering the costs of the upgrades. She notes that 99 percent of gas stations are not owned by oil companies -- they're owned by independent businessmen.

Consumers will also be hit by higher ethanol targets, as the mandate drives up gas prices. According to the Congressional Budget Office, if the RFS continues to rise, the price of E10 gasoline will rise by up to 26 cents by 2017.

Source: Nan Swift, "Enough of big ethanol bullying consumers," Washington Examiner, November 7, 2014. 


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