This study is a statistical analysis to estimate the significance of factors that influence the volume of E85 sales to the general public in Minnesota from 1997 to 2006.
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The market for E85�a fuel blend of 85 percent ethanol and 15 percent gasoline�is small
but growing rapidly. I use data for E85 sales at fueling stations in Minnesota to estimate
demand for E85 as a function of retail E85 and gasoline prices. I find that demand is
highly sensitive to price changes, with an own-price elasticity as high as -13 and a gasolineprice
elasticity as high as 16 at sample mean price levels. Demand is most sensitive to
price changes when the relative price of E85 is at an intermediate level, at which point
PEATSim (Partial Equilibrium Agricultural Trade Simulation) is a dynamic, partial equilibrium, mathematical-based model that enables users to reach analytical solutions to problems, given a set of parameters, data, and initial
conditions. This theoretical tool developed by ERS incorporates a wide range of domestic and border policies that enables it to estimate the market and trade effects of policy changes on agricultural markets. PEATSim captures
Agricultural markets often feature significant transport costs and spatially distributed production and processing which causes spatial imperfect competition. Spatial economics considers the firms’ decisions regarding location and spatial price strategy separately, usually on the demand side, and under restrictive assumptions. Therefore, alternative approaches are needed to explain, e.g., the location of new ethanol plants in the U.S. at peripheral as well as at central locations and the observation of different spatial price strategies in the market.
A key objective of U.S. energy policy is to increase biofuel use by highway vehicles to 36 billion gallons per year by 2022. The Energy Independence and Security Act envisions that nearly all of this target will be met by gasohol (E10) or neat ethanol (E85). Since the market for blending ethanol with gasoline at 10% by volume will saturate at about 15 billion gallons, most of the ethanol will need to be sold in the form of E85 unless higher order blends are approved by automakers and the Environmental Protection Agency.
One fundamental issue influencing the economic viability of the ethanol industry is consumers' demand responsiveness to both gasoline and ethanol price changes. This paper presents an alternative approach by estimating the geographic variation of price elasticity of demand for ethanol across the study area.
The Alternative Fuels Data Center (AFDC) Station Locator identifies E-85 Fuel station locations across the country.
Funded from the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Bioenergy Technologies Office.
In 1997, eight E85 (85% ethanol; 15% gasoline) fuel pumps were installed at separate retail fuel stations in Minnesota to provide high-blend ethanol fuel to flexible fuel vehicle (FFV) owners. FFVs capable of utilizing gasoline, E85, or any mixture of the two, were beginning to be mass produced by vehicle manufacturers and distributed through fleet and retail sales nationwide. These state-level E85 efforts were part of larger federal and state policies and programs promoting the use of alternative transportation fuels to displace traditional gasoline and diesel fuel, which continue today.