Report: Low Gas Prices Have Little Effect on E85 Sales

ALEXANDRIA, Va. — Lower gas prices are not slowing down the sales of E85 fuel, the latest report by the Fuel Institute found. 

According to Retailing E85 — An Analysis of Market Performance, July 2014 - August 2015, because E85 delivers less energy per gallon than unleaded fuel, its price is a critical factor in driving consumer demand. During the Fuel Institute's first analysis of the E85 retail market in 2014, it found that the most successful E85 retailers were pricing it around 45 cents per gallon below unleaded, averaging E85 sales volumes about 2.9 percent of unleaded volume.

During that analytical period, unleaded was selling for an average of $3.49 per gallon at retail. After the report was released, retail gas prices dropped, prompting the question of what effect that drop had on E85 sales.

In both sample sets analyzed by the Fuels Institute, E85 was priced at a level close to 50 cents below unleaded. During the second time period studied, E85 sales volume increased to an average store volume of 4.77 percent of unleaded sales volume, despite the decline in unleaded price. This indicates that the price of unleaded fuel has limited influence on the sale of E85.

Conditions that affect a store's overall sales of E85 may not be directly related to pricing strategy. Although volume and price are correlated, lacking a consistency correlation can cause the data to not indicate that a linear trend line could effectively predict sales performance in certain pricing strategies, the report found.

In every method of data analysis used for the report, stores with lower throughput volumes of unleaded tended to report higher E85 volumes, in both real gallons and as a percent of unleaded volume. Ultimately, consumers are influenced by numerous factors when deciding to purchase E85. 

The report concluded that to identify the right conditions to persuade drivers to opt for E85 over unleaded fuel requires careful study of prevailing market conditions, consumer behavior and localized strategies to maximize the return on investment for the fuel. According to the Fuels Institute, relying on price experience alone will not necessarily yield predictable results. 

The full report is available here.

Founded by NACS, the Association for Convenience & Fuel Retailing, in 2013, the Fuels Institute is a nonprofit, research-oriented think tank that is dedicated to evaluating market issues related to vehicles and the fuels that power them. The organization's board commissioned the report to provide an analysis of retail sales price and volume of E85 compared with unleaded sales over 13 months, utilizing daily sales data from 20 percent of retailers selling E85 in the United States.

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