Ethanol producer: E85 sold at high profit margin

Monday, September 10, 2007

A story by in the Marshfield News-Herald:

Considering the high price of gasoline, E85 fuel should be a lot cheaper, said Ray Rhodes of Marshfield.

Rhodes' flexible fuel vehicle can use either straight gasoline or E85, a mix of 85 percent ethanol and 15 percent gasoline.

Most central Wisconsin communities have only one gas station selling E85.

The Store, 1505 W. McMillan St., Marshfield, sells E85 for around $2.70 a gallon, while regular gas hovers around $3.13 a gallon. The Store is a franchise of the Schierl Co. based in Stevens Point.

"It's a monopoly," said Bob Sather, the chairman of the board of directors of Ace Ethanol of Stanley. The company makes ethanol for E85 fuel.

The pure ethanol Ace produces sells for less than $2 a gallon and is bought by the companies that blend the gasoline and ethanol to create E85, Sather said.

"They could sell E85 for less than $2.50 a gallon and still make a profit. But E85 is in competition with their gasoline, so they set the margin way higher," said Sather.

Another contributing factor is that most E85 fuel is blended by the major petroleum companies. They also require that branded franchises purchase E85 from the flagship brand.

"If it's a Shell station, the owner must buy the E85 from Shell. It works like that for all big oil," he said.

The cost of E85 will come down when there isn't a monopoly on blending the fuel, Sather said.

"If you control the supply, you dictate the price," said Sather.

To find locations selling E85 fuels, log on to the Web site