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    Low Gas Prices Taking Toll on Alt Fuels

    CNG being hit harder than higher ethanol blends.

    By Brian Berk, Convenience Store News

    JERSEY CITY, N.J. — Plummeting gas prices, which have dipped below an average of $2 per gallon in several states, have consumers cheering. But the same cannot be said for those in the alternative fuels business. 

    While lower gas prices allow consumers to have more money in their wallets — perhaps leading to higher in-store spending at convenience stores — feeling the pain are alternative fuels, which have benefited from traditional petroleum costing more in recent years. Compressed natural gas (CNG) is being hit the hardest from this new reality. 

    Prices at the pump for E10 (considered traditional petroleum under the blend wall), have dipped below the price per gallon for CNG in Oklahoma City. At several OnCue locations there, E10 is currently priced at $1.65 per gallon, while CNG sells for $1.70, said Scott Minton, CNG Business Development Manager at OnCue Marketing LLC, operator of approximately 20 retail CNG locations. 

    Minton believes the price of E10 could slide further in the near future, but he noted that CNG still remains cheaper than E10 at some of the retailer's rural locations throughout Oklahoma.

    Although large fleets and municipalities continue to switch to CNG tanks at a swift pace, smaller fleets and individual consumers are shying away from doing so at increasing rates, Minton reported.

    "That's definitely concerning on a long-term basis," he said. "We can sustain lower gas prices for six months, or maybe even 12 months, but if gasoline is $1.50 or $1.60 [per gallon] at this time next year, we [fore]see consolidations or closings of CNG conversion companies."

    On a scale of one to 10, Minton said his concern level regarding the short-term affect that lower gas prices will have on CNG sales is a "six or seven. I'm definitely concerned with the short-term impact. But if the price of gasoline goes back up in the next six or nine months, our CNG sites will be waiting for [customers] with open arms ready to help [them] save money."

    Ethanol Tells a Different Story

    Sales of E85, a fuel blend ranging between 70-percent and 85-percent ethanol with the remainder comprising gasoline — is also starting to feel some pain, although not to the same extent as CNG.

    "I think we're going to see some pullback in E85 sales because you just aren't seeing as large a [price] spread between [E10] and higher ethanol blends," Monte Shaw, executive director of the Iowa Renewable Fuels Association, told CSNews Online

    E85 prices at the pump remain lower than traditional petroleum by an average of 20-25 cents per gallon. However, E85 generally produces less mile-per-gallon fuel efficiency, which narrows the gap between the prices of the two fuels. Shaw stressed that even when factoring in this fuel efficiency difference, E85 is still less expensive than E10 at the pump, however.

    Alternative fuels are not only touted for price, added Shaw. Being locally produced and causing less of an environmental impact are two other main reasons to purchase alternative fuels.

    "A lot of people like that they are not sending money overseas and [they like the] dramatically reduced toxic tailpipe emissions alternative fuels provide," he said.

    E15/88 octane fuel, meanwhile, used to sell for between 5 and 10 cents less per gallon than E10 at two Lawrence, Kan., Zarco USA locations, but now the price differential has dropped to 2 cents per gallon, acknowledged Scott Zaremba, president of Zarco USA. E15 currently sells for $1.83 per gallon, while E10 now sells for $1.85

    Despite this smaller price spread, demand is still quite strong for the blend of 15-percent ethanol and 85-percent gasoline, Zaremba said.

    "We essentially have a mid-grade fuel selling for less than E10," he explained. "Usually, people have to pay 17 to 20 cents [per gallon] more for a mid-grade fuel, but they are actually paying less than E10. We're seeing a lot of people choose higher octane fuels."

    By Brian Berk, Convenience Store News
    • About Brian Berk Brian Berk is managing editor of Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner, where he specializes in covering motor fuels, technology and financial news. He has served the magazine industry for 14 years and has also worked in the radio and newspaper fields. Berk holds a bachelor's degree in communications from the State University of New York at Cortland and a master's degree in journalism from Quinnipiac University in Hamden, Conn.

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