By John Eichberger
Have E85 sales suffered from the drop in retail gasoline prices? I’ve been asked this question several times since the Fuels Institute published its “E85 — A Market Performance Analysis and Forecast” report in November 2014. My response: Let’s take a look at more recent data to determine what’s really happening.
Back in November, the E85 report evaluated several sources of data pertaining to the retail sales of E85, including daily sales data provided by more than 200 retail locations over an 18-month period culminating in June 2014. The report found that these 200 stations sold E85 for an average price that was about 44 cents below unleaded gasoline, generating sales that equaled 2.8% of their unleaded volumes.
By contrast, the top 10 locations, measured in terms of total E85 gallons sold per month, sold E85 for a price that was approximately 50 cents per gallon below that charged for unleaded gasoline, resulting in E85 sales that equaled up to 6.2% of their total unleaded volume.
But, as we all know, since that November release of the E85 report, the fuels retail market changed dramatically. Retail gasoline prices tumbled from an average national price of about $3.67 in June 2014 to a low of $2.04 at the end of January 2015.
To determine the effect these lower gas prices have had on E85 sales, the Fuels Institute went back to its bedrock principle — the data — and relied on readily available data contained in NACS’s monthly CSX sales reports.
The approximately 100 to 120 stores represented by NACS’s CSX data sample in the November report showed an average E85 price that was 35 cents below that of regular unleaded and generated sales that equaled 3.3% of reported unleaded sales. E85 margins in this data averaged 26.5 cents per gallon compared with 14.3 cents for unleaded. (Data presented in the E85 report covered sales from January 2009 to June 2014.)
In looking at the CSX data for E85 sales since March 2013, concerns about E85 potentially suffering due to lower priced gasoline appear to be unfounded. Since retail unleaded prices began their freefall in June 2014, E85 sales have actually picked up. In fact, the period from June 2014 to March 2015 saw average E85 sales of 3,726 gallons per month — 8.9% higher than the average sales from March 2013 to June 2014.
Total gallons sold may be misleading in absence of knowledge concerning the store’s overall performance, however. Therefore, it’s helpful to consider E85 volume as a percent of unleaded volume to determine the amount of a store’s overall sales E85 represents. During these time periods, unleaded volume was stagnant and E85 volume as a percent of unleaded volume improved from 3.6% to 4.0%.
This increase in E85 sales coincided with an increase in the E85 to unleaded discount. Prior to the drop in unleaded prices, E85 was being sold at an average price 68.0 cents below gasoline. After June 2014, the average discount increased to 73.1 cents. On the flip side, however, with the decline in gasoline prices, E85 margins have also dropped from an average of 24.9 cents per gallon from March 2013 to June 2014 to 13.6 cents since.
Again, while this is a small sample of the overall market (148 stores reported E85 sales to CSX for March 2015), it does represent a same-store comparison and helps answer the question: Has the drop in gas prices negatively affected the market for E85? From this data, we can say that it has not.
For more information about the Fuels Institute or to get involved, contact John Eichberger, executive director, at (703) 518-7971 or email him at [email protected]
FMN Will be working to support the efforts of the Fuels Institute. The Fuels Institute is a research-oriented think tank founded and managed by NACS, dedicated to evaluating the market issues related to consumer vehicles and the fuels that power them. We will regularly run materials developed by the institute, as appropriate, for the education of our readers. This piece previously ran in the July 2015 issue of NACS Magazine.
