Alternative Fuel Without the Additional Cost
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Tags: green, flexible fuel vehicle (FFV), alternative fuel, ethanol
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 Following Sweden, the United States is subsidizing gas stations that offer an alternative fuel to regular gasoline: E85. This biofuel consists of 85 percent ethanol, hence its title. The remaining 15 percent is gasoline. E85 has a lower carbon footprint than regular gasoline as it burns cleaner and recaptures carbon dioxide emissions. It is also environmentally-friendly, domestically produced, and completely renewable. If this isn't enough to convince you, E85 is also less expensive than regular gasoline. As of July 24, 2009, the national average price was $2.37 per gallon for gasoline but only $1.99 per gallon for E85. But don't run to the nearest E85 station yet. First, only 2,000 such stations exist in the United States. Second, your vehicle might not be E85-compatible, especially if manufactured before 2005.
While the availability of E85 is limited, gas stations have some incentives to install E85 pumps, including government subsidies. and grants from the ethanol industry. Consumer demand for E85 is also increasing because drivers are now better informed and compatible vehicles are more common. Unfortunately, E85 has a downside that prevents it from sweeping the globe: initial cost. Installing E85 pumps and operating its tanks costs over $200,000 per station, only 15 percent of which the subsidies cover. Our major oil producers are extremely wealthy because of gasoline and they will not squander their wealth on an alternative that eats into their profits while earning them less revenue per gallon sold. Given the costliness of switching to E85, most oil companies will not act without added incentives. The exception is Wal-Mart, which recently announced that it will offer E85 at all of its gas stations. Honing this commitment could make it the nation's largest E85 retailer.
A limited supply of compatible cars also prevents the E85 dream from becoming a reality. However, the Big Three domestic automakers are releasing many such cars in 2009. If you want a compatible car, known as a flexible fuel vehicle (FFV), you can easily find one. Examples include the 2009 Chevrolet Impala, 2009 Pontiac G6, and 2009 Ford Expedition. Despite their ability to consume both regular gas and E85, most FFVs do not earn a price markup. In general, they are available at no additional cost. Perhaps this is why GM, Ford, and Chrysler expect FFV sales to skyrocket over the next few years. They are increasing their supply in response. According to GM, at least half of its line will consist of FFVs by 2012.
Only time will tell as to whether or not the automakers ride the E85 wave, which is an almost-certain ticket out of their financial turmoil. Their recent actions suggest that they realize the profitability of E85. If so, they will benefit financially along with consumers, who will save their money at the pump. And, of course, E85 is much more eco-friendly than standard gasoline. Purchasing an FFV sounds like a pretty good deal to me. |
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