Some Wonder Why Pure Gasoline Costs More

Monday, January 12th 2009, 6:46 pm
By: News On 6

By Emory Bryan, The News On 6

TULSA, OK - There is less pain at the pump these days.  Gas prices continue to remain low compared to six months ago.  But, some have noticed a price disparity at the pump.  Why is 100% gasoline more expensive than 10% ethanol gas?

At McKay's Conoco, gasoline sales are strong, even for full service and, even though every gallon is more expensive than most any other station.

"My sales have increased tremendously.  I couldn't believe it, before I was getting a load a week, now I'm getting two loads a week," said Tom McKay of McKay's Conoco.    

Owner Tom McKay says it's because he sells only pure gasoline that's ethanol free, something his customers are willing to pay for.

"Matter of fact it's expensive, it runs anywhere from 10 to 20 cents a gallon more, but people don't want that stuff in their car," said Tom McKay of McKay's Conoco.

Ethanol blends are usually sold because of government mandates or voluntary agreements to help control pollution.  Stations also have a financial incentive to sell blends because it usually lowers the cost of gasoline.

"When it was introduced, if you didn't carry it, you were going to get beat by your competitor by quite a bit per gallon, and that's really why it was introduced into the Tulsa area," said QuikTrip's Mike Thornbrugh.

Last year, ethanol was significantly cheaper than gasoline, so blending it lowered the cost of a gallon of fuel.  Now crude oil prices have dropped to the point that ethanol and gasoline cost about the same to produce, so there is less of a financial incentive to dilute gasoline with ethanol.

That's why companies that have sold the blended fuel are now considering switching back to pure gasoline because it could be less expensive.

"We look for the cheapest compliant fuel that we can that will withstand the strict standards and quality that we place upon it, and if that is gasoline with less or no ethanol, and the economics are right, sure we're going to look at it," said QuikTrip's Mike Thornbrugh.

But, stations are not switching yet.  The cost of gasoline has gone up in the last week, and the volatility of it makes the decision more complicated.  It's not easy for stations to switch back and forth, so it would take a more significant drop in the cost of making gasoline to make stations switch over.