The Hidden Cost of Higher Ethanol: E15’s Fuel Economy Trade-off

On January 20, 2025, President Trump issued Executive Order 14156, declaring a “National Energy Emergency” and ordering the Environmental Protection Agency (EPA) to consider allowing year-round use of E15 (gasoline blended with 10.5-15.0% ethanol) across the U.S. Would enabling broader use of E15 really make a difference? What are the tradeoffs?

The Lay of the Land
Currently, in the United States, E10 gasoline blends (gasoline containing up to 10% ethanol) are widely used. The EPA has also approved waivers allowing E15 for use in light-duty conventional vehicles of model year 2001 and newer. According to the U.S. Department of Energy (DOE) Alternative Fuels Data Center (AFDC), E15 is available in more than half of the U.S. states at over 3,000 stations. But E10 remains the limit for gasoline vehicles older than model year 2001, motorcycles, marine engines, heavy-duty gasoline engines, and non-road equipment (like lawn mowers). Importantly, E15 is not currently allowed in California due to the state’s stricter environmental regulations and concerns about the impact of E15 on air quality.[1] Some parts of the Northeast and Mid-Atlantic regions also have restrictions on E15, due to similar environmental concerns and existing fuel infrastructure limitations.

Savings vs. Efficiency
Generally, increasing fuel supply by adding more ethanol (e.g., transitioning from E10 to E15) in a high-price market should help lower prices as ethanol generally prices below gasoline. However, E15 has a slightly lower energy density than E10, resulting in a 1.74% reduction in fuel economy according to Stillwater analysis based on the GREET Model’s 2022 gasoline blend data.[2] While this reduction in energy content might seem minor, to maintain the same cost per mile driven in a $4.00-per-gallon market, the price of E15 would need to be reduced by approximately 7 cents per gallon (cpg) because you need 1.74% more E15 to travel the same distance as E10.[3]

California-Specific Hurdles
Unlike most other states, the California fuel market lacks specific mechanisms to account for the lower energy content of E15. As it is, California’s (and most of the nation’s) gasoline wholesale and regulatory market is based solely on volume, not energy content. This means that a gallon of E10 and a gallon of E15 would be treated the same, even though E15 provides less energy. Without any corresponding price adjustment, consumers would effectively pay more per mile when using E15 instead of E10. California’s unique regulatory environment further complicates the adoption of E15, and the state’s stringent fuel standards and ambitious carbon reduction programs (including Cap and Trade and the Low Carbon Fuel Standard) already contribute to higher fuel prices due to the costs associated with producing and distributing cleaner and lower carbon fuels.

Conclusion
Balancing affordability, energy efficiency, and environmental goals is a complex challenge. Although the goal of increasing supply of fuels (via transition from E10 to E15) may bring costs down, careful pricing adjustments would be needed for E15 to benefit consumers on a cost-per-mile basis. Wholesale traders who historically trade ethanol on a simple gallon basis need a mechanism to discount ethanol’s lower energy content in an E15 and E85 market. Ideally, at a minimum, a California policy change requiring all fuel sold at the “street sign” would be on a gasoline-gallon-equivalent price to reflect the lower energy fuel. Meanwhile the price on the pump (which is under the jurisdiction of the Department of Weights and Measures) must show the price per simple gallon. One could argue that today’s gasoline fleet is so clean that CARB’s past emissions prohibitions on E15 could be waived by EPA under this new emergency Executive Order. In any case, we may be in for a wild ride.

For more insights, contact Stillwater.