Nebraska appears headed for a change at the fuel pump in which most of the regular unleaded gasoline with an 87 octane rating will become a 10 percent ethanol blend.
The change is coming because pipeline companies are stopping deliveries of 87 octane gasoline to Nebraska, Iowa and the Dakotas in September and offering a product rated 84 percent octane instead.
Ethanol is the cheapest way to get back to the 87 standard, but ethanol sources including Andrew Johansen of E Energy Adams see the market realignment as something less than a bonanza.
“Nebraska is a pretty small market in the grand scheme of things,” he said Monday. “A plant our size (60 million gallons per year) makes three-fourths of the ethanol needed for the entire state.”
Market watchers see the federal Renewable Fuels Standard and the efforts of the oil industry to squeeze more money out of a barrel of oil as factors in the octane shuffle.
The fuels standard requires that an increasing portion of all highway fuel comes from corn and other so-called conventional renewable sources each year through 2015. And the current price relationship between ethanol and gasoline makes ethanol the more embraceable choice for fuel blenders.
The other way — and the more expensive way — to get to 87 from 84 “sub octane” is by mixing it with premium grade gasoline.
The shift in the market will put pressure on the pocketbooks of Nebraskans who don’t want to use ethanol, said Patrick DeHaan, based in Chicago with the price-tracking service called GasBuddy.
“Is it going to be ethanol or is it going to be premium?” he asked. “And unfortunately for those who don’t like ethanol, there’s an economic incentive to blend with ethanol right now.”
GasBuddy operates LincolnGasPrices.com and more than 250 similar websites that track gasoline prices at more than 140,000 stations in the United States and Canada.
Nebraska’s region is the last in the United States to see the shift from 87 octane gasoline to 84 by fuel suppliers.
One of the head-scratching implications of being at the tail end of the realignment is that California, the largest fuel market among states, comes closer to having 10 percent market penetration for ethanol right now than Nebraska.
Earlier on, state officials in California were highly critical of ethanol’s value as a renewable fuel and Nebraska was on its way to becoming the nation’s second-leading ethanol producer.
“Aside from that irony, it’s been a long time coming,” DeHaan said.
Rose White, spokeswoman for AAA Nebraska, said it remains to be seen how expensive 87 octane fuel might become if it’s made by blending 84 octane and premium-grade gas.
White noted that the premium contribution represents only 10 percent of the fuel mixture, but Johansen of E Energy Adams said it takes a 50-50 mix of 84 octane and premium grade to get the octane rating to 87.
“So, depending on the market,” he said, “we could see a 15-25 cent difference,” in price between 87 octane gasoline and an 87 octane blend made by mixing in premium grade.
Whatever happens, DeHaan said, “motorists are going to set the market.”
“(But) I think motorists want cheaper fuel prices and I think the corn lobby wants ethanol to be consumed, so it’s hard to push against that.”
Jim Stark of Omaha-based Green Plains Renewable Energy, owner of Nebraska ethanol plants at Ord, Central City and Atkinson, said making a blended 87 octane product with ethanol could offer consumers a price break from regular unleaded.
“What we hope to see,” Stark said, “is a lesser-priced 87.”