The Federal Reserve Claims That Adding Ethanol to Fuel Will Reduce Gas Prices. We’re Not Convinced.

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      Gas prices in the US have reached an average of $4 per gallon, and people are notably frustrated. As the conflict with Iran continues, the closure of the crucial Strait of Hormuz persists, cutting off 20% of the global oil supply from the market. However, the EPA claims to have a solution: increase America's fuel supply by mixing in more affordable ethanol. What could possibly go wrong?

      Well, depending on the age or condition of your vehicle and your location, the implications are certainly not negligible. This is the topic we are exploring in this week’s episode of The Drivecast.

      This is a highly debated issue, so let’s present some facts. Aside from specific blends, most gasoline sold in the US is already mixed with 10% ethanol, known as E10—meaning every gallon consists of 90% gasoline and 10% ethanol by liquid volume. This is done because ethanol acts as an oxygenator, promoting cleaner combustion while also increasing the octane rating. Lead used to be the additive of choice, but that was ultimately problematic.

      In some regions, particularly in the Midwest, consumers can opt for E15 gas, which contains 15% ethanol and 85% gasoline and is labeled as 88 octane at the pump. It’s also cheaper, since you’re effectively purchasing less gasoline and more ethanol per gallon, but there are air quality regulations that limit its sale during the summer due to its tendency to produce more smog compared to E10.

      The EPA's focus is currently on lifting these regulations to permit oil companies to produce E15 gas for a longer duration in the spring and summer, prior to the usual June cutoff. Theoretically, this means more of the economical ethanol-rich blend will be accessible for an extended period. However, E15/88 octane is only available at a small percentage of gas stations nationwide, so increasing the supply won't significantly affect the prices of regular 87, 89, 91, and 93 octane gas in the immediate future.

      Even if the demand for E15/88 results in a decrease in prices for other grades, there’s a more significant concern: ethanol is a solvent that can damage fragile rubber seals and plastics in older engines, potentially leading to severe issues. This is one reason why its use is typically limited to 10%. The EPA advises against using it in vehicles manufactured before 2001, although this critical note isn't mentioned in the agency’s enthusiastic press announcements. Plus, even in newer vehicles, using E15 can reduce fuel efficiency since it is less energy-dense than gasoline.

      So, yes. Don't count on this working out effectively.

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      Full Transcript

      Joel Feder: Have you seen those gas prices? And by “man,” I'm referring to Kyle, who resides in LA where everything costs a fortune.

      Kyle Cheromcha: Please don’t remind me. I noticed gas prices as high as $8 per gallon on a sign just the other day. That's certainly hard to overlook. It’s painfully noticeable out here.

      Joel: Andrew, how much are you paying in your area?

      Andrew Collins: Well, in rural New York, we are just now hitting the $5 mark for 93 octane, which is quite unusual for this region. Usually, prices hover around the $3 mark at best, but it has been a tense few weeks.

      Kyle: I don’t have much sympathy for that. None of this situation feels satisfying. It all stinks, but there’s something slightly gratifying about watching the rest of the country panic over $5 gas while we’ve been paying much higher for years in California. I feel like Bruce Willis in Die Hard, “Welcome to the party, pal.” That’s my current sentiment.

      Joel: But you don’t understand my situation. I endure snow and wind chills of negative 40. I shouldn’t have to pay extra for that sunshine tax, right? I hear you pay a premium to live in a snow-free area.

      Kyle: California has its own set of reasons for high living costs, but that’s not today’s focus. Today’s topic is ethanol. Andrew,