Frugal Shopper: Will E85 Save You Money?

GM E85 presentation

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Ford, GM, and Chrysler now have a wide range of vehicles that are E85-compatible—meaning they can run on a blend of up to 85 percent ethanol, 15 percent gasoline—plus Nissan and Toyota have outfitted some of their largest trucks for it and it's now offered in the 2009 Mercedes-Benz C300.

There are now about six million E85 vehicles on U.S. roads. Despite frequent promotion by some automakers and energy companies, and even though it was a hot campaign issue this past year, public awareness remains lackluster. In a 2007 survey by Harris Interactive for Pavilion Technologies, 57 percent of drivers didn't think their car would run on biofuels, while 44 percent didn't know the difference between E85 and regular gasoline.

Environmentalists, politicians, energy companies, and various interests are also still battling it out over ethanol, and failing to agree on a unified message, for various reasons that we won't get into in this short post focusing on the economics of E85.

2009 Mercedes-Benz C Class 3.0L Sport RWD

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So, could you save money from fueling up with E85 instead of gasoline?

First, you need to be aware that a gallon of E85 isn't equal, energy-wise, to a gallon of gasoline. When running E85, vehicles perform virtually the same as they would with gasoline but they typically get 25 to 30 percent fewer miles out of each gallon of fuel. As a guide, the EPA lists fuel economy for E85 vehicles for both fuels on its FuelEconomy.gov site, so it's easy to calculate some of your own numbers.

And it really depends on which region of the country you live in. Ethanol stations are of course easiest to find in the corn-belt states, in the plains and Midwest, over into Michigan, Pennsylvania, and upstate New York. But it's a regional thing, with ethanol still quite hard to find in the Rocky Mountain states, New England, and in parts of the Southeast. For instance, the large, populous state of Virginia has just three ethanol stations. Ethanol is becoming more widespread on the West Coast, but E85 stations can still only be found in the larger cities or along major interstates.

As of today, E85Prices.com was reporting a price spread of 23 percent in Glenmont, New York—that's enough to potentially make E85 pay off in some vehicles—but less than five percent in Dallas, Texas and Birmingham, Alabama. And over the month of June, the price spread was more than 20 percent in New York, Wisconsin, Iowa, Nebraska, Massachusetts, and South Dakota.

Nationwide, E85 currently costs nearly 15 percent less than gasoline, with today's average pump price for gasoline at $2.58 while ethanol averages $2.20. Late last year and into this spring, the national price spread for ethanol dipped below 10 percent, and in December, as gasoline prices dropped to their lowest level in recent years, the spread briefly dropped below five percent.

2009 Chevrolet Silverado 1500

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But it's worth just running some sample numbers; take the 2009 Chevrolet Silverado 1500 as an example. Equipped with the popular 5.3-liter V-8 and rear-wheel drive, the Silverado gets 14 mpg city, 20 highway (16 combined). On E85, those ratings drop to 10 mpg city, 15 highway (12 combined). The Silverado would then use a third more ethanol than gasoline, and assuming the price differential stays in its current state all year, it would cost about $331 more typically, over 15,000 annual miles of driving, to use ethanol instead of gasoline.

Of course, to environmentalists and those hoping for better energy security, only 15 percent of the E85 is gasoline and you'd still save hundreds of gallons of gas—much of it foreign-sourced—each year.

Our advice? With an E85 vehicle you really can't go wrong; E85 versions of vehicles aren't going to get any worse mileage with regular gasoline than ones that can't accept E85, while you get the added bonus of being able to run mainly on ethanol. You probably won't save money on E85, but with ethanol remaining part of the ramp-up to stricter fuel economy rules, and a recent buzz of interest in cellulosic ethanol from plant wastes, it's here to stay.

And who knows? Maybe we will get to a point in the near or distant future where the numbers will make sense.