We all know that E85 is cheaper than gasoline. But critics have responded that since it has less energy than gasoline, you end up using more, so the cheaper price is more than offset by the greater consumption. Of course, this is a valid point.
Well, things are changing. According to AAA, in the past month, the price of regular gasoline has gone up nearly $.07. The price of E85 has gone down $.18. As a result, on a national basis, even after adjusting for E85's lower energy content, it now is cheaper than premium gasoline, and is within $.09 of mid-grade gasoline.
This trend will continue. Ethanol production continues to increase rapidly. And although the cheap dollar makes imported oil more expensive, it has no impact on the price of domestic ethanol.
The law of supply and demand is a wonderful thing.