The Clinton Herald, Clinton, Iowa

July 30, 2013

Non-ethanol gas in Iowa could see price jump


The Clinton Herald

---- — 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.

The fuels association sees Magellan’s switch as a potential boost for ethanol.

Monte Shaw, the organization’s executive director, is urging Iowa gasoline retailers to consider selling 89 octane E15 gasoline — which is 15 percent ethanol — in addition to E10 ethanol that already is widely sold. He believes E15 gas could sell for about a nickel per gallon less than E10 gas and would be a good second option for gas stations with just two gas tanks. E15 is approved only for 2001 model year and later vehicles.

“Getting to this next level of ethanol blend would be a big sponge for corn” sales and a boon to Iowa’s agricultural economy, Shaw said.

Only a sliver of Iowa gasoline sales now involve E15 fuel, but if the ethanol-blended product were sold on a widespread basis here it could be a model for the rest of the nation, he added.

Other parts of the country have already made the change from 87 octane to lower octane gasoline for various reasons, and Shaw expects other Iowa pipeline operators to follow suit after Magellan’s product shift.

Iowa gasoline retailers said last week they weren’t sure yet how the upcoming changes will affect gasoline prices.

“Every day could be different because you are dealing with a commodity that is traded 24 hours a day. . We are out there scouring trying to find the cheapest price that we possibly can,” said Mike Thornbrugh, government and public affairs manager for Tulsa-based QuikTrip, which has 20 stores in the Des Moines area.