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July 30, 2013

Non-ethanol gas in Iowa could see price jump

DES MOINES — Iowa motorists who buy gasoline without ethanol soon could see a price jump at the pump.

Iowa’s largest pipeline operator, Magellan Midstream Partners, will no longer ship 87 octane regular gasoline to its Iowa terminals.

Instead, the pipeline operator will start shipping 84 octane fuel, which can be blended with more expensive 91 octane fuel to produce the regular 87 octane product.

Iowa requires a minimum 87 octane fuel at gas pumps.

The bad news for consumers is that the 87 regular octane fuel without ethanol will probably cost more — possibly a lot more — at the pump. The price for 91 octane premium gas without ethanol also could spike, according to The Des Moines Register.

The change takes effect on Sept. 15. Meanwhile, the cost for ethanol-blended gas — purchased by an estimated 82 percent to 83 percent of Iowa motorists — is expected to remain about the same.

The change is driven by pipeline customers, including refiners, petroleum traders and petroleum marketers.

They want greater flexibility to mix products and more uniformity across states, said Magellan spokesman Bruce Heine.

Iowa and Nebraska are among the last states in the country to require a minimum octane of 87, he said, but shipping the 84 octane still allows for the product to be mixed with a higher octane product to reach the required 87.

Heine said other traders, refiners and marketers are also looking for more uniformity among the states.

Allowing them to blend their own mixtures increases efficiency and reduces the risk of a shortage, he said.

A new study commissioned by the Iowa Renewable Fuels Association estimates the wholesale cost of the blended regular 87 octane gasoline without ethanol will be 30 cents a gallon more than ethanol-blended fuel after the change. It costs distributors more not to offer ethanol blends, in part the government subsidizes it.

Depending on the scenario, one industry official said, the increased demand could drive the pump price for regular 87 octane gasoline 30 to 52 cents higher per gallon than ethanol-blended fuel.

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